DUDA.oildA.varsity

OIL DA Varsity Oil Disadvantage [1/2] OIL DISADVANTAGE [1/2].......................................................................................................................................1 SUMMARY...................................................................................................................................................................3 GLOSSARY...................................................................................................................................................................4 OIL 1NC [1/3]................................................................................................................................................................5 OIL 1NC [2/3]................................................................................................................................................................6 OIL 1NC [3/3]................................................................................................................................................................7 2NC IMPACT CALC – RUSSIA ................................................................................................................................8 ***UNIQUENESS***...................................................................................................................................................9 PRICES HIGH............................................................................................................................................................10 PRICES HIGH – TRENDING UP............................................................................................................................11 PRICES HIGH – TRENDING UP............................................................................................................................12 RUSSIAN ECONOMY HIGH...................................................................................................................................13 ***LINKS***..............................................................................................................................................................14 LINK – SPS [1/2].........................................................................................................................................................15 LINK – SPS [2/2].........................................................................................................................................................16 LINK – HE-3...............................................................................................................................................................17 LINK – HE-3 – PRICE DROPS................................................................................................................................18 LINK – HE-3 – ALT ENERGY ................................................................................................................................19 ***INTERNAL LINKS***........................................................................................................................................20 INTERNAL LINK – PERCEPTION .......................................................................................................................21 INTERNAL – US SPURS INTERNATIONAL ACTION.......................................................................................22 INTERNAL – DEVELOPMENT LOWERS PRICES............................................................................................23 ***RUSSIA IMPACT SCENARIO***.....................................................................................................................24 2NC IMPACT – RUSSIA WAR................................................................................................................................25 2NC PRICES KEY RUSSIA......................................................................................................................................26 ANSWERS TO: “RUSSIA ECONOMY IS RESILIENT”.....................................................................................27 ***A2 HIGH OIL BAD***........................................................................................................................................29 ANSWERS TO: “OIL SHOCKS”.............................................................................................................................30 ANSWERS TO: “HURTS THE ECONOMY”........................................................................................................31 ANSWERS TO: “HURTS THE ECONOMY”........................................................................................................32 ANSWERS TO: “HURTS THE ECONOMY”........................................................................................................33 ANSWERS TO “HURTS THE ECONOMY”..........................................................................................................34 ***A2 FINITE OIL***...............................................................................................................................................35 ANSWERS TO: “WE’LL INEVITABLY RUN OUT.” [1/2].................................................................................36 ANSWERS TO: “WE’LL INEVITABLY RUN OUT.” [2/2].................................................................................37 ***AFFIRMATIVE***..............................................................................................................................................38 1 OIL DA Varsity ***UNIQUENESS***.................................................................................................................................................39 PRICES NOT STABLE..............................................................................................................................................40 PRICES DECREASING............................................................................................................................................41 PRICES LOW – TRENDING DOWN......................................................................................................................42 ***HIGH OIL BAD – US ECONOMY***...............................................................................................................43 US ECONOMY – LOW OIL BEST..........................................................................................................................44 HIGH OIL BAD – US ECONOMY...........................................................................................................................45 ***A2 HIGH OIL GOOD***....................................................................................................................................46 A2 HIGH OIL GOOD FOR ECONOMY.................................................................................................................47 A2 SHOCKS BOUNCE BACK.................................................................................................................................48 A2 STOCKPILE SOLVES.........................................................................................................................................49 ***OIL IS FINITE***................................................................................................................................................50 FINITE OIL.................................................................................................................................................................51 FINITE OIL.................................................................................................................................................................52 2 OIL DA Varsity Summary This disadvantage argues that high oil prices are good. Many affirmatives such as SPS and HE-3 use space resources to provide energy to earth that can replace “fossil fuels” such as oil and coal. This “alternative” energy decreasing demand on conventional sources such as oil will cause oil prices to go down. Oil prices are only so high because countries need oil. If something were to replace it, oil producing nations could not charge so much for it because people would not need it. Think of it this way – would you pay more for something that you couldn’t live without or something that you could? The impact to this argument is that high oil prices are key to keeping the Russia economy in good shape. If oil prices go down, Russia will be in a really bad position because they will lose all the money they made on oil. This would cause Russia to be really unstable, to lose control over their nuclear weapons, and possibly get involved in conflicts which could cause extinction. 3 OIL DA Varsity Glossary Oil shocks – Periods of instability in oil prices where they either increase or drop dramatically. Some people think this hurts the economy because it makes it very difficult to predict the price of oil and businesses, etc. can lose a lot of money. Peak oil – The point where we are extracting the maximum amount of oil. Peak oil is followed by a rapid decline in which we start running out of oil very quickly because the supply cannot meet the demand. Also known as “finite.” 4 OIL DA Varsity Oil 1NC [1/3] Oil prices will remain high – middle east instability and shaky global economy will keep high prices afloat The Daily times 6/25/11, ( The daily times is a Pakistani news agency, “ Crude oil prices witness a surge amid uprising in MENA”. http://www.dailytimes.com.pk/default.asp?page=2011\06\25\story_25-6-2011_pg5_7. 6.25.2011, Google. AW) ISLAMABAD: Amid popular uprising in the Middle East and North Africa (MENA) region and turbulence in currency markets, crude oil prices remained on the higher side in the outgoing FY11. With almost one week remaining, WTI and Arab crude, benchmark for Pakistan, oil prices during FY11 have surged by 22% and 52%, respectively, says a press release issued here on Friday. Most importantly, a sharp increase in Arab gulf crude as compared to WTI is indicative of changing demand pattern of international oil markets. On the local front, the rise in the international oil price unleashed the pricing Pandora where government attempted various measures including reducing Petroleum Levy (PL), fixing OMC margins and abolishing wharfage & incidental charges to keep the domestic oil prices in check. Despite all the measures local oil products prices grew by 28%-60% with diesel and petrol prices touching all-time highs in May 2011. International crude oil & products market in FY11 once again was marked with high volatility in the intentional oil prices primarily on account of political unrest in Middle East and uncertainty surrounding the global economic recovery. Where, WTI crude prices jumped by 22% on closing day basis, average prices stood at $89 per barrel (up 19% YoY). On the other hand, Arab light crude oil prices—a benchmark crude for local energy companies, rose by a massive 52% during FY11 whereas average price stood at $91 per barrel (up 24% YoY). It is expected that global oil market will display high volatility on account of divergent views regarding the global economic health. However, based on prevalent trends oil prices are expected to remain firm around the levels of $96 per barrel in FY11. Our long-term oil prices assumption remains $90 per barrel. In turn, firm oil prices are expected to bode well for E&P and refinery sector, while being a source of inventory gains for OMCs. ppi The search for energy in space spurs alternative energy. Edmonton Journal 6/13 (6/13/11 "Solar Satellites: The Key to Green Energy" Accessed: 7/3/11 http://www.edmontonjournal.com/technology/Solar+satellites+green+energy/4933251/story.html GR) With gas prices on the rise, the race is on for cheap alternative fuel sources, including solar power, but amid a wash of criticism, the solar industry may not even be in the running. The major criticisms against solarpower facilities, such as wind farms, are unreliability and inefficiency. Solar power depends on environmental factors beyond human control and that makes investors anxious. These facilities also require areas with high amounts of sunlight, usually hundreds if not thousands of acres of valuable farmland and all for relatively little power production. This is why, in the 1960s, scientists proposed solar-powered satellites (SPSs). SPSs have about the most favourable conditions imaginable for solar energy production, short of a platform on the sun. Earth’s orbit sees 144 per cent of the maximum solar energy found on the planet’s surface and takes up next to no space in comparison to land-based facilities. Satellites would be able to gather energy 24 hours a day, rather than the tenuous 12-hour maximum that land-based plants have, and direct the transmitted energy to different locations, depending on where power was needed most. 5 A new emphasis on domestic missions has created an ideological split between the old and new guard in the military leadership.5 percent in 1997 with many economists declaring the true figure to be much higher. Why? Because even a very small change in capacity or demand “can bring big swings in price” explains Rajeev Dhawan. A day but it cause oil price to plunge to near $10 a barrel. Lower oil prices devastate the Russian economy. but in a land without well-defined property rights or contract law and where subsidies remain a way of life. So today. The National Interest.foreignaffairs. Business Week. Chechnya's successful revolt against Russian control inspired similar movements for autonomy and independence throughout the country. If conditions get worse. a high price for oil has therefore become the key to the government's ability to balance the budget. would poison the environment of much of Europe and Asia. but it is mainly a product of the high price of oil. and wages. nearly all of which make some claim to sovereignty.even though in decline -. Twenty-two percent of Russians live below the official poverty line (earning less than $ 70 a month). From 1989 to the present. and new laws have increased local control over the armed forces.” http://findarticles. it reached 9.OIL DA Varsity Oil 1NC [2/3] Even a small change in oil ushered by renewables could plummet prices Carey 2003 (John. the morale of Russian soldiers has fallen to a dangerous low. the consequences for the United States and Europe will be severe. Russian economic collapse causes a civil war that escalates and goes nuclear Steven David. Feb 24) Yet reducing oil use has to be done judiciously. No nuclear state has ever fallen victim to civil war. Draftees serve closer to home.Letter from Moscow. In a society where. economic deterioration will be a prime cause. republics feel less and less incentive to pay taxes to Moscow when they receive so little in return. the GDP has fallen by 50 percent. If these rebellions spread and Moscow responds with force. if the U. Reformers tout privatization as the country's cure-all. the consequences would be even worse. dishonest decadence . That’s why flawed energy policies. Every dollar difference in the price of oil translates into roughly $1 billion in budget revenue.com/p/articles/mi_m2751/is_72/ai_105369906/pg_1. Damage from the fighting. January/February 1999. As the massive devaluation of the ruble and the current political crisis show. If the price should fall significantly and stay relatively low. ten years ago. Most alarming is the real possibility that the violent disintegration of Russia could lead to loss of control over its nuclear arsenal. A drastic or abrupt drop in demand could even be counterproductive. Newly enhanced ties between military units and local authorities pose another danger. The effect would be to concentrate power you guessed it in the hands of Middle Eastern nations. Soldiers grow ever more dependent on local governments for housing. Taming the Oil Beast. Strong ethnic bonds promoted by shortsighted Soviet policies may motivate non-Russians to secede from the Federation. housing. An embattled Russian Federation might provoke opportunistic attacks from enemies such as China. unemployment scarcely existed. Massive flows of refugees would pour into central and western Europe. since the structure of the Russian Federation makes it virtually certain that regional conflicts will continue to erupt.does not suffer civil war quietly or alone. FOREIGN AFFAIRS. krais. what little civilian control remains relies on an exceedingly fragile foundation -. But with the Communist Party out of office. could do harm. and medical care. With the economy collapsing. Within Russia. and oblasts grow ever more independent in a system that does little to keep them together.000 nuclear weapons and the raw material for tens of 6 . but even without a clear precedent the grim consequences can be foreseen. Russia's 89 republics. Higher cost producers such as Russia and the US would either have to soil oil at a big loss or stand on the sidelines. the prospects for transition to an American-style capitalist economy look remote at best. The improved appearance of Moscow (although not the rest of the country) is indisputable. Were a conflict to emerge between a regional power and Moscow. p. Meanwhile. Just as the sheer brutality of the last Russian civil war laid the basis for the privations of Soviet communism. it is not at all clear which side the military would support. the lowest-cost producers and holders of two thirds of the known oil reserves. food.S. A major power like Russia -. Russia's condition is even worse than most analysts feared. increasing the risk that disgruntled generals may enter the political fray and feeding the resentment of soldiers who dislike being used as a national police force. For instance. direction of the Economic Forecasting Center at Georgia State University’s Robison College of Business. Modern Russia can neither collect taxes (it gathers only half the revenue it is due) nor significantly cut spending. succeeded in abruptly curbing demand for oil prices would plummet. the slowdown in Asia in the mid-1990s reduced demand only by about 1. Drastic cuts in spending mean inadequate pay. Three-quarters of them already have their own constitutions. Divining the military's allegiance is crucial. as it did in much of the 1980s and 1990s.html If internal war does strike Russia. Armed struggles in Russia could easily spill into its neighbors.personal friendships between government leaders and military commanders. however. power devolves to the periphery. Russia will be plunged into a severe economic crisis. http://www. A future conflict would quickly draw in Russia's military. As the central government finds itself unable to force its will beyond Moscow (if even that far). Should Russia succumb to internal war. Russia retains some 20. Summer 2003. civil war is likely. a second civil war might produce another horrific regime.org/19990101faessay955/steven-r-david/saving-america-from-the-coming-civil-wars.5 million bbl. pay state employees and repay Russia's foreign debt. In the Soviet days civilian rule kept the powerful armed forces in check. such as trying to override market forces by rushing to expand supplies or mandating big fuel efficiency gains. even the stoic Russian people will soon run out of patience. “A low. political scientist. particularly attacks on nuclear plants. however. in scores of sites scattered throughout the country. So far. And it is hard to think of anything that would increase this threat more than the chaos that would follow a Russian civil war.OIL DA Varsity Oil 1NC [3/3] thousands more. the government has managed to prevent the loss of any weapons or much material. making weapons and supplies available to a wide range of anti-American groups and states. If war erupts. 7 . Moscow's already weak grip on nuclear sites will slacken. Such dispersal of nuclear weapons represents the greatest physical threat America now faces. endangering the lives of hundreds of thousands of Americans. The Russian military’s continued fixation on surprise-attack scenarios into the 1990s. it is in the U. of the post-Soviet states. LN.S. v 78 n 1. destroying a valuable export market. interest to have a government in Moscow that is strong and determined enough to draw the line and to prevent centrifugal. Senior Associate. has created a situation in which the United States might find itself the victim of a preemptive strike for no other reason than a war scare born of Russian domestic troubles. There was opportunity to avoid conflict through negotiation or deescalation. A rebellion in Saudi Arabia could destroy its ability to export oil. War Scare: U. intentions and to nuclear overreaction. “The Return of Russian History. and Russia. The war scares of August 1991 and October 1993 arose out of coup attempts. January/February 1994.S. Nuclear war arising from Russian domestic crises is a threat the West did not face. “Saving America From the Coming Civil Wars.S. At least in nuclear confrontations of the 1950s–1970s—during the Berlin crisis. and 1973 Middle East war—both sides knew they were on the nuclear brink.” FOREIGN AFFAIRS. meet both criteria: Mexico. Jan/Feb 1999. however. LN. and China. Only three countries. The nuclear war scares of the 1980s and 1990s have been one-sided Russian affairs. These countries include Indonesia. Stability is important for a nation with thousands of nuclear weapons and continuing territorial tensions with its newly independent neighbors. While this may sound like a complicated and improbable chain of events. Johns Hopkins University. civil war in a cluster of other states could seriously harm American interests. the Philippines.OIL DA Varsity 2nc Impact Calc – Russia And. Turkey. during the Cold War. with the West ignorant that it was in grave peril. instability risk nuclear war Dimitri Simes. Egypt. What the United States needs most in its greatly weakened but still potentially formidable superpower rival is a combination of domestic stability and a system of checks and balances. p. This is most probable scenario for nuclear war – will engulf the United States Steven David. Russia’s story in the 1990s is one long series of domestic crises that have all too often been the source of nuclear close calls. or at least faced to a much lesser extent. the oil on which the industrialized world depends. coup. Professor of Political Science. Saudi Arabia. neither Yeltsin's political future nor even the future of Russian democracy should be ends in themselves. Cuban missile crisis. Civil conflict in Mexico would produce waves of disorder that would spill into the United States. Carnegie Endowment for International Peace. Of course. combined with Russia’s deepening internal problems. separatist trends from going out of control. and sending a torrent of refugees northward. or civil war—could aggravate Russia’s fears of foreign aggression and lead to a miscalculation of U. Thus. The civil war in Chechnya caused a leadership crisis in Moscow. Israel. if not all. which contributed to the nuclear false alarm during Norway’s launch of a meteorological rocket in January 1995. 8 . 67+. creating not only nuclear and environmental disasters but a grave threat to world peace as well. For the United States. In none.” FOREIGN AFFAIRS.-Russia on the Nuclear Brink. And internal war in Russia could devastate Europe and trigger the use of nuclear weapons. Former US Intelligence Operative. Russian internal troubles—such as a leadership crisis. Too much disunity in Russia (as appealing as it is to those who "love" that country so much that they would prefer to see several Russias) increases the likelihood of a civil war that could easily engulf most. Venezuela. in fact. are the stakes as high or the threat of war as imminent. Err negative – internal conflict makes nuclear miscalculation inevitable – prefer this evidence – cites US intelligence studies and accounts for military policy Pry 99 (Peter Vincent. OIL DA Varsity ***Uniqueness*** 9 . 2011. In fact.html." Oil prices rising in the long run—demand rising Taylor. The pattern will be saw-toothed. http://www. It worked. But otherwise they can only go up.27 a barrel. Yes. Oil's stubborn refusal to trend lower since the United States and other industrialized nations announced they would flood the oil market with 60 million barrels of fuel over the next 30 days is raising questions over what's driving the market -." she says in a report. it could actually be bullish for prices. for a week. The United States. s award-winning financial journalist and analyst. http://www. expect oil prices to rise”. SL) Oil prices have surged in the last few days and are now less than a dollar from where they were when President Obama made the controversial decision to tap the nation's strategic reserve last Thursday. staff writers for The Telegraph. July 2. Helen Henton. "The move will likely undermine confidence in Opec's ability to supply the market in the longer term. The fact is the world consumes about 85 million barrels of the stuff every day. agrees that the release of strategic stocks will weigh on prices near-term but this effect may not be long-lived.telegraph. 2011. of Standard Chartered.wpxi. 6/26 (Rowena Mason and Garry White.html. AD: 7/3/11. So if Libya doesn't come back on line soon. West Texas Intermediate crude edged lower to $94. http://www. SL) Caroline Bain. On Thursday. for example. But oil prices are back where they were and likely to go up.com/opinion/columnists/politics-aside-expect-oil-prices-to-rise124904419.uk/finance/commodities/8599850/The-IEA-cannot-hold-back-the-tide-of-higher-oilprices. 6/30 (Steve Hargreaves. so releasing 60 million barrels doesn't do much to tilt the supply-demand balance. "It is just a short-term measure designed to bridge a gap in supplies. If you're wondering why the International Energy Agency and the United States decided to release 60 million barrels of oil from their strategic reserves. Oil prices are not coming down over time. it's doing that now. rest assured that politics has something to do with it. can and will likely introduce policies to encourage other forms of energy use -. SL) Politics is an oily business.com/automotive/28406828/detail. Oil prices tumbled.sharp moves up followed by equally sharp ones down.co.S. which is so severely sensitive to oil prices. AD: 7/3/11.OIL DA Varsity Prices High Oil prices rising despite release of reserves Hargreaves.electric cars and more natural gas use. Over time. “Politics aside. says: "Although the immediate impact of the IEA's reserve release will be to depress prices. limited global oil supply growth will likely mean higher-for-longer prices. there's not much bureaucrats and politicians can do to stop the rise of oil.winnipegfreepress. of the Economist Intelligence Unit. Reserves are finite and cannot be released for ever. if we have another recession they will." "But in almost every scenario for the next five years. 7/2 (Fabrice Taylor. But any drop in U. demand will be taken up and then some by growing demand in Asia. 2011. June 30.fundamentals or pure speculation? Oil prices rise in the long run—reserves are finite Mason and White. and the shares of oil producers with them. 10 .html. June 26. the oil market could tighten sharply in 2012. staff writer for CNN Money. “Oil Prices Rising A Week After SPR Release”. AD: 7/3/11. But oil is a political business. “The IEA cannot hold back the tide of higher oil prices”. But that's still nearly $5 higher than last week. of course -. in the more medium term. when prices fell over 4% following the oil release announcement. only to exact a much larger payback later. Since 2000 -. Far more important is the ability of producing nations to meet needs. Last week. and the increase in output from non-OPEC producers is inadequate to quench this demand. While painful. That will put a huge dent in consumer wallets. has puzzled many analysts. of the world's consumption. Short-lived price spikes and troughs make for frenzied headlines in newspapers and on the Internet as well as for hysterical talking heads on radio and TV.S. (For more on the effects of this move. when the IEA helped cause a selloff in the petroleum market by announcing that 60 million barrels were being released from strategic reserves held by the U.despite the post-9/11 economic downturn. sparking higher prices. it's not "enormous. futures contracts for June 2012 delivery of WTI crude were trading around $99.his most bullish scenario projects a Brent average price of about $140 through next year -. Canada. or a little over a third. 2011 [Gene. which is one reason they take a nasty economic toll when they arrive. has studied the effect of oil shocks on the economy. the Paris-based organization that represents oil-consuming nations. foresees an extended price plateau of $170. is mainly paying the West Texas Intermediate price. while Brent crude for June 2012 delivery was commanding just $112. the total emergency stocks held world-wide." And with all due respect to the expertise of the commercial hedgers. the global stock-market swoon of the early 2000s." also linked the decision to concern about spare capacity within the Organization of Petroleum Exporting Countries. with more than 25 years' experience calling the market. jet fuel and gasoline seem likely over the next 12 months.Saudi Arabia.5 percentage points from quarterly growth in real gross domestic product.50-a-gallon gasoline will become the norm. But Tanaka. Author of a September 2009 report called "Crude-Oil Balances to Tighten Again by 2012. new highs on crude. says that commercial hedgers–who deal in the underlying commodity and thus have lots of professional experience in these matters -. but what matters for the economy are average prices over at least a few months.OIL DA Varsity Prices high – Trending Up Oil prices higher. THERE ARE FOUR MAIN PLAYERS in the global oil drama. this forecast isn't quite as extreme as it might appear. 1. http://online. which includes the U. Australia. MD] The U. While welcoming increased production from this source. July 2. As oil producers' spare capacity gradually declines to worrisome levels. he cautioned that it "will take time" to come on line. before the promise of greater supply brings a gradual easing.1 million barrels per day. View Full Image Ann Elliott Cutting for Barron's The continued short-term easing of oil prices should benefit the economy over the summer. even pros can be wrong. Oil is likely to stay at $150 for several months. While Allidina is more cautious than Rothman -. This raises the specter that the Saudis might have a problem raising their output.6 billion barrels. New Zealand and most of Europe. and non-OPEC nations. which includes Libya. although probably not disastrous. Another oil bull. Despite the recent 20% decline from April highs. likely to begin this year..“Get Ready for $150 Oil”. The $110 price estimate comes from taking the midpoint between the market price on West Texas Intermediate oil traded on the New York Mercantile Exchange in New York and on Brent crude traded on the Intercontinental Exchange in London. month after month. The thirst for oil by non-OECD nations puts pressure on supply. and that prices will continue to ease as a result. With this. while ramping up the desirability of fuel-efficient cars. While the recent unusual 10%-15% premium of Brent over WTI. But readiness can be enhanced by awareness of the likely outlook for petroleum prices–and the outlook today is relatively grim.S. Following some further easing over the summer.trending to $150 Epstein. Rothman cites a comment made by Nobuo Tanaka. In 2000. And there are the non-OECD nations. They currently have a record net short position on the Nymex futures and options market. According to Credit-Suisse energy analyst Joachim Azria. are essentially the same." View Full Image While Barron's sees some short-selling potential this summer.are "overwhelmingly bearish" and are putting their money where their convictions are. publisher of the Bullish Review of Commodity Insiders newsletter and Website. pruning about 1. to $150.html? mod=TWM_pastedition_1#articleTabs_panel_article%3D1." The Barron's projection assumes that the Saudis will ramp up output this month. but not kill it. and 27 other countries. non-OECD demand amounted to 37. who not surprisingly said that he had been in "close consultation" with "major producing countries. now. Steve Briese.their broad concerns are similar. That's what we've done.S.7%. Mexico and the former Soviet Union. which actually is of higher quality. and especially from its largest producer. On the supply side is OPEC. Tanaka spoke on June 23. Cornerstone Analytics oil analyst Michael Rothman. On the demand side are the nations of the Organization for Economic Cooperation and Development. He suggests using a midpoint between Brent and WTI to capture the effective price. currently in a phase of rapid economic growth. So a projected increase to $150 by the second quarter of next year assumes a rise of $40. of spare capacity. Barron's estimates that the effective price of crude was about $110 in this year's second quarter. even though it amounted to just a little over two-thirds of the nearly 90 million barrels the world consumes each day. Still. the 2008 financial crisis and the 2008-2009 Great Recession -. with spikes to $165 or $170. Comments Rothman: "Read between the lines. James Hamilton. by next spring differs by several country miles from the oil market's own implied price outlook." Allidina foresaw the process by which unused capacity would eventually be reduced to puny levels. Briese concludes that the "short profit potential is enormous. but the cost of gasoline and diesel and jet fuel reflects the higher Brent price. Iraq and Saudi Arabia. Morgan Stanley's commodity research head Hussein Allidina. The projected oil shock of spring 2012 will hurt the economic expansion. even a $40 rise. economy is never completely ready for higher oil prices. executive director of the International Energy Agency. those Barron's polled agree that the lower price on WTI is potentially misleading." and especially in the land that Allidina dubs the "kingdom of spare capacity" -.S. The ostensible reason for releasing the 60 million barrels was to help replace the loss of production from wartorn Libya.5%. or lack thereof. the second leg of the long-term bull market in petroleum–the first occurred in 2007-08–probably will begin this fall.) The markets seemed quite impressed by this infusion. Saudi Arabia. In support of his view. The dynamics of both the first (2007-08) leg of the bull market and the second leg.global oil consumption has advanced by a yearly average of 1. $4. Because history shows that the hedgers often have been right. it amounts to 48. while nonOPEC output has risen by a yearly average of less than 0. technically defined as crude that can be produced on a sustained basis within CONTINUED… 11 . come to only about 18 days of supply. the U. or nearly half.barrons. an economics professor at the University of San Diego. diesel fuel. View Full Image The upswing in demand is adding urgency to concern about the availability. see Commodities Corner column. sees this only furthering the decline of OPEC's spare capacity to "untenable levels. heating oil. the average monthly price could reach a record $150 per barrel by next spring. which just ended. We think this is a great buying opportunity for bulls on petroleum. which include India and China. At that rate of daily off-take.6 million per day.com/article/SB50001424053111903617204576411791590055646. including Norway. Japan. to $147. an even larger share of America's gross domestic product comes from services rather than goods. farm equipment). restaurant meals. The main impact would be on the consumer.. is much higher now than it was 31 years ago. the economic contraction would have happened anyway. according to the U. However. on July 11.50 through April-June 1980 comes to $93. Get ready for higher oil prices.5 million barrels back on stream. the use of oil in heating and in electricity-generation has greatly declined. which struck early in 2008. fuel efficiency leveled off in the late 1990s. In addition. In 1980. because OPEC members had been openly exceeding quotas already. The recessions in the OECD countries.OIL DA Varsity Prices high – Trending up CONTINUES. the lash of $150 crude will decrease their willingness to pay. the actual monthly high of $39. moderate growth in Germany and the U. even greater potential from Saudi Arabia itself -. meant weakened demand for oil that placed some drag on the uptrend and eventually helped sink the price of petroleum. Germany and Japan. reached in July 2008. Morgan Stanley oil bull Allidina believes the 2012 Brent price that will ration demand is about $130 for his baseline forecast. Even if Chinese economic expansion slows–a focus of some disagreement among prognosticators -. For one thing.they have no alternative to driving to work -. for every dollar of nominal GDP. Libya can eventually bring 1. more supply could come from ending the de facto moratorium on drilling in the Gulf. But with new auto sales running at about an 11 million annual rate and the American light-vehicle fleet now numbering about 250 million. will reduce hiring. spending on crude accounted for 9. but nothing less than $170 is required for "demand destruction" in non-OECD nations. airlines will boost fares. as will happen this summer. there is the stark fact that non-OECD countries are poorer than OECD countries.. Oil analyst Michael Rothman sees a two-tiered market: $130 would ration demand in OECD countries. And that somewhere else could be savings or money that otherwise would be spent on clothes. and has made no progress since then. there is the added risk that companies.S. One reason the U. even though all historical prices are adjusted to 2011 dollars. Estimating the consumption effect.5% of nominal GDP for a few months in 1980. As the bottom chart shows. bringing a gradual pullback. But none of this is like to help much by spring 2012.. until the first leg of the bull market began in 2007. View Full Image IS THE WORLD RUNNING OUT OF OIL? Probably not. 70% is used for that purpose. hurt businesses. including the U. apart from the brief spike in 1991. is less susceptible to an oil shock than it used to be is that. the OPEC meeting that broke up early last month with no formal deal to increase quotas was of no great concern in itself. given Americans' appetite for SUVs and for cars with six. The causality also went the other way. 12 .S. as San Diego's Hamilton notes. ground fleet. cars.25 of a percentage point. benefiting consumer spending and growth. significant improvement will take awhile. which require a lot of oil. More importantly. Bank of America Merrill Lynch economist Neil Dutta calculates that every $10 price rise normally trims GDP growth by 0. as noted earlier.5 point drag on growth from the $40 price hike balances various factors. buses. As the cost of jet fuel soars. however. Why will the toll be lower? One big factor: Since 1980. over the next four quarters. a $150 price could motivate governments to delay projects like the building of new roads.S.S. measured in total vehicle-miles per gallon. while today. of course. And $170.S. is Rothman's price target. 30 to 45 days. The top chart on this page -.40. And. Assuming that the Saudis can meet their commitment on a timely basis. There is huge potential from Iraq. Also. Energy Information Administration. OPEC's spare capacity will still continue to decline. and from tapping Alaska's wildlife reserve.) Oil at $150 a barrel would. will be sustained by steady. The assumed 1.and eight-cylinder engines.in which the 2011-12 data are an average of WTI and Brent -shows that the projected monthly average of $150 per barrel would be a record high. it consumes less oil than it once did. which has taken 1. the dynamic also goes the other way when prices fall. Result: higher oil prices. Barron's believes that non-OECD demand could be more price-sensitive than Rothman assumes. On the other hand. the Saudis signaled their willingness to boost output from nine million barrels a day to more than 10 million this summer. funds allocated to it must come from somewhere else. movies or iPads. That could reduce passenger traffic. Perhaps the most important thing to know about spare capacity is that only the OPEC producers have any. too. if modest. While it makes some sense that their hunger for "black gold" will motivate them to pay even more for it than their richer counterparts. economic growth in the OECD world. as the chart shows. post-1980 oil prices were pretty stable for more than 20 years. That's substantially higher than the estimated 7% if oil hits $150. which means $40 lops off a full point.non-OECD demand should continue to expand faster than demand from OECD countries. Underlying this splurge has been complacency over oil prices.K. As the price chart on this page shows. Because gasoline is a necessity for many people -. anticipating shortfalls in consumer spending.S. with a short-lived spike. leading the companies to cut flights. For example. The non-OPEC gang is probably already pumping out all it can. WORRIES OVER SPARE CAPACITY have been exacerbated by the civil war in Libya. causing a multiplier effect that could worsen a bad situation. trucks. Crude at $150 will likely encourage these and other sources of supply. (Of course. For another. Producing more services generally requires less energy than making more widgets does. But the $150 price peak will not mean peak consumption in the U. The 2007-08 bull market in oil peaked with an average monthly price of a record $133. when measured as a percentage of gross domestic product. and a resumption of growth in earthquake-ravaged Japan by next year.50 in today's dollars. Price punishment of the sort we anticipate next spring could restart serious progress in fuel efficiency. The consensus estimate from the economists surveyed for the Blue Chip Economic Indicators is for real gross domestic product growth of 3% in the U. the fuel efficiency of the U.and closer to home. Result: The squeeze on spare capacity will be greater than ever before. While that oil shock certainly worsened the Great Recession. in contrast. 56% of all crude purchased in this country powered vehicles (planes.and since it's tough to quickly reduce the amount consumed by very much. The coming second leg of the bull market.5 million barrels a day out of the supply stream. since its main cause was the bursting of the housing bubble. as we expect it to. reducing economic activity. 8-June. The economic decline bottomed out in mid-2009 and the economy began to grow in the first quarter of 2010.ifwnet. The Russian economy. a severe drought and fires in central Russia reduced agricultural output.htm. “It is paramount to have an office in St Petersburg. 09June) Russia has undergone significant changes since the collapse of the Soviet Union. Vladivostok and Novorossiysk would eventually become more competitive.com/freightpubs/ifw/index/forwarders-slam-russian-ports/20017877777. “Close. prompting a ban on grain exports for part of the year.cia. said out-dated customs procedures at ports were driving up operating costs with regulations varying by location and by cargo. and with increased container handling capacity Russia’s key ports at St Petersburg. Manager of FS Mackenzie International’s Russian/CIS Department. Russian ecnomomy rebounding from 2010 losses CIA 2011 (“The World Factbook”. was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up. 13 .html.and other less competitive heavy industries that remain dependent on the Russian domestic market. The economy had averaged 7%. and poor infrastructure in need of large investments. in late 2008 to slow the devaluation of the ruble. The government also devoted $200 billion in a rescue plan to increase liquidity in the banking sector and aid Russian firms unable to roll over large foreign debts coming due. a high level of corruption. Area Manager Black & Caspian Sea at Panalpina. https://www. resulting in a doubling of real disposable incomes and the emergence of a middle class. http://www.” he added.” Hemmings agreed it was important to have staff on the ground at key locations to deal with local difficulties. centrallyplanned economy to a more market-based and globally-integrated economy.OIL DA Varsity Russian economy high Russian economy is rebounding IFW 11 (Freight and Logistics News Service. High oil prices buoyed Russian grow the first quarter of 2011 and could help Russia reduce the budget deficit inherited from the lean years of 2008-09. the second largest exporter of oil. However. “Through our own office there we are able to work with the port closely and have our staff available to go to the port to resolve any potential problems that may arise. Russian industry is primarily split between globally-competitive commodity producers . “Forwarders slam Russian ports”.” Leineweber said the strong drive towards containerisation would slowly improve efficiency. and slowed growth in other sectors such as manufacturing and retail trade. Stefan Karlen. The Central Bank of Russia spent one-third of its $600 billion international reserves.) The Russian economy is forecast to grow at over 4% this year. however. with notable exceptions in the energy and defense-related sectors. regular monitoring of entry ports is necessary in case unforeseen events such as natural disasters or congestion negatively impact the operation and thus service and timing. but forwarders contacted by IFW said more investment in processes and facilities was required to facilitate increased trade. Russia's long-term challenges include a shrinking workforce. moving from a globally-isolated. This reliance on commodity exports makes Russia vulnerable to boom and bust cycles that follow the highly volatile swings in global commodity prices. but with few results so far. however. “Service levels at different ports differ from shipping line to shipping line. and the third largest exporter of steel and primary aluminum . Trade volumes w. Lisa Hemmings.” she said. Economic reforms in the 1990s privatized most industry. but inflation and increased government expenditures may limit the positive impact of these revenues. difficulty in accessing capital for smaller. The government since 2007 has embarked on an ambitious program to reduce this dependency and build up the country's high technology sectors.gov/library/publications/the-world-factbook/geos/rs. said Russian gateways were generally more expensive than ports in most of the rest of Europe both on terminal handling and demurrage charges. The protection of property rights is still weak and the private sector remains subject to heavy state interference.in 2009 Russia was the world's largest exporter of natural gas. non-energy companies. the world's third largest. OIL DA Varsity ***links*** 14 . usually hundreds if not thousands of acres of valuable farmland and all for relatively little power production. SPSs have about the most favourable conditions imaginable for solar energy production. such as wind farms. making the concept even more technically and financially sound today. but amid a wash of criticism. At the end of three years of studies all participating organizations . in time. resulted in the order to stop all further work in the summer of 1980.OIL DA Varsity Link – SPS [1/2] Solar Powered Satellites spur alternative energy Edmonton Journal 6/13 (6/13/11 "Solar Satellites: The Key to Green Energy" Accessed: 7/3/11 http://www. and opposition of the Carter administration to large programs. in geosynchronous orbit 22. SPS threatens the future of oil Ralph H. and. opposition to the concept from the established energy industry who saw it as a threat to their future. an energy system that would have unlimited capacity. covered with vast arrays of solar cells. Development of enabling technologies. However. Consolidation of responsibility was completed when the Department of Energy was formed in 1977. and economists . Nansen. scientists proposed solar-powered satellites (SPSs). With Solar Power Satellites.assembled in Lincoln. Solar Space Industries. such as solar cells and wireless energy transmission. concerned citizen groups representing organizations both supporting and opposing the concept. T h e Department of Energy developed a comprehensive program that concentrated on four areas: 1) technical feasibility. 15 .html GR) With gas prices on the rise. The public has forgotten that there is an energy system that could replace oil. by 1980 the oil crisis of 1973-74 appeared to be over and nearly forgotten.com/technology/Solar+satellites+green+energy/4933251/story. in April of 1980 to report on their findings. 3 ) societal impact. are unreliability and inefficiency. coal.pdf (date accessed 7/3/11) (ott) The concept of the Solar Power Satellite energy system is to place giant satellites. and 4) cost comparison. research scientists from technology development companies. and nuclear power. short of a platform on the sun. Japan is now committed to the development of Solar Power Satellites with the ultimate goal of producing 30% of global energy needs by 2040. would result in energy costs much below those of fossil fuels o r nuclear. These facilities also require areas with high amounts of sunlight. rather than the tenuous 12-hour maximum that land-based plants have. Because of the 23" tilt of the energy efforts.edmontonjournal. in the 1960s. Also during this time system definition and design has been initiated in foreign countries. The major criticisms against solarpower facilities. Funding for 3 years was $19. NASA was responsible for the technical studies and DOE retained responsibility for the others as well as overall program management. the Environmental Protection Agency and their research scientists from universities and research institutes. Earth’s orbit sees 144 per cent of the maximum solar energy found on the planet’s surface and takes up next to no space in comparison to land-based facilities. and direct the transmitted energy to different locations.org/wp-content/uploads/2008/10/00484148_2. The conclusion of the conference was that there was no technical reason why the satellite system should not be developed and that the potential benefits were very promising.5 million. Satellites would be able to gather energy 24 hours a day. the race is on for cheap alternative fuel sources. 2) environmental impact. including solar power.300 miles above the Earth's equator. Since that time there has been no significant organized system development work on the concept in the United States. This is why. the solar industry may not even be in the running. Solar power depends on environmental factors beyond human control and that makes investors anxious. Concerns over the size and cost of the program. the cost of electricity by the year 2050 would be between 15 and 70 times less than with fossil fuels or nuclear. January 1996 Wireless Power Transmission: The Key To Solar Power Satellites IEEE AES Systems Magazine http://electricalandelectronics.the major aerospace companies and their subcontractor teams. Each satellite will be illuminated by sunlight 24 hours a day for most of the year. depending on where power was needed most. be environmentally clean. most of it for export. has continued for other applications. Nebraska. Thi s was one of the primary reasons the program was stopped. http://www.com/archives/1170 (date accessed 7/3/11) (ott) The demand for solar power satellites is expected to become more common in the future.renewablepowernews. it must be environmentally clean. Educational background in the field of Human Resources Management. Second. January 1996 Wireless Power Transmission: The Key To Solar Power Satellites IEEE AES Systems Magazine http://electricalandelectronics. it must be low cost.pdf (date accessed 7/3/11) (ott) T h e solution to the problems will require a new energy source to replace oil and coal and become the primary energy source for the future. First. T o accomplish this the next energy source must satisfy some very basic criteria. oil and coal. 16 . it must be nondepletable. Fourth. it must become available to everyone on Earth if war is to be avoided. Advances in the enabling techriologies along with significant infrastructure development now make possible commercial development of the program with some government support. 3/27/10 Overview of Space Solar Energy. Fifth. One is a government program and the other is commercial development with some government support. Increased SPS demand kills fossil fuel Jimmy Eriksson. The greatest pressure for new sources of energy is the exhaustibility of conventional sources such as natural gas. The Solar Power Satellite system is the only energy source with known technology that can meet the criteria for a viable major new energy source and move the world into the fourth era of energy. Nansen. so it will not have to be relplaced by the next generation. or it will not b e developed to produce large quantities of energy. i t must be in a useful form so i t can support the developing societies a s they emerge as well as the developed nations.OIL DA Varsity Link – SPS [2/2] SPS will replace oil as primary energy source Ralph H. Solar Space Industries. I t cannot b e a solution only for America. Today that is no longer the case. In 1980 the only conceivable option wa s a massive government sponsored and funded program.org/wp-content/uploads/2008/10/00484148_2. The challenges of climate change are giving polluting sources of energy a very dreadful connotation. Third. Some people estimate that by 2050 there will be around 10 billion people where 85 percent will be in developed countries. The future might leave typical fossil fuel behind. so the Earth is no1 destroyed a s we develop. Professional freelancer in Green Technology and Scientific Development. There are two primary paths that can be followed to develop Solar Power Satellites. These f ive criteria are simple but challenging to satisfy: Nondepletable Low cost Environmentally clean Available to everyone In a usable form T h e solution to the problems described above can be accomplished by the development of Solar Power Satellites. but must be able to solve global problems also. according to conservative estimates. “Mining The Moon”.” but rather a necessity. H3 will replace oil Souza. Helium-3 could help free the 17 . He3 Kills US dependence on fossil fuels Popular Mechanics 2k4(December 7. WORCESTER POLYTECHNIC INSTITUTE. “There is 10 times more energy in Helium-3 on the moon as compared to the natural resources on Earth. Secondly.L. Accessed: 7/3/11. Professor of Fusion Technology Institute.OIL DA Varsity Link – He-3 Helium 3 technology creates alternative energy markets IB Times 6/29 (Staff Reporter 6/29/11 " Mining Moon for Helium-3: Future Perfect Power Source?" Accessed: 7/3/11 http://m. Otalvario & Singh 06 [Marsha. Diana. He-3 provides us with the opportunity of exploring and settling a permanent base on the Moon. hence only small amounts of He-3 are required to supply the same amount of energy as large volumes of oil. led by NASA. geologists. Furthermore.” adds G. Apollo 17. science magazine. Considering the shortage of power on Earth and the dire need for an alternate source of power. there has been considerable interest among physicists. Dissertation. Moreover. http://www. The Earth’s supply of He-3 is negligible. this rare isotope of helium has many applications in homeland security. 2-17-2006 HARVESTING HELIUM-3 FROM THE MOON. may be exhausted by the middle of the 21 st century. Alongside an increase in energy demand. http://www. He-3 is a heavy isotope of noble gas helium and is present everywhere in the universe in varying amounts. but the mineral was found in abundant quantities in soil samples taken from the lunar regolith in 1972 in the exploratory mission.popularmechanics. medicine and science. It is with this necessity in mind that exploration of He-3 fusion as a potential energy substitute or a complement to other energy sources is being investigated. social scientists and economists in extracting and using the He-3 available in the Moon. helium-3 fits the bill perfectly. alternative energy sources are not only an “alternative. it comes without any radioactive effects and it is non-toxic. Extracting helium-3 from the moon and returning it to Earth would. especially on the part of China and India. Deep.ibtimes. to generate vast amounts of electrical power without creating the troublesome radioactive byproducts produced in conventional nuclear reactors. be difficult. Nevertheless.com/science/space/moon-mars/1283056 EL) Small quantities of helium-3 previously discovered on Earth intrigued the scientific community.wpi. national security. But extracting it from the moon is going to be a gigantic task.com/lunar-reconnaissance-orbiter-nasa-moon-apollo-mission-surface-171239. but the potential rewards would be staggering for those who embarked upon this venture. it has a high energy density when combined with deuterium in a fusion reaction.pdf GR] The energy scenario today is governed by uncertainty and fear. The major arguments for the exploration of He-3 are as follows: firstly. Kulcinski. which would give us a solid base for further space exploration. Energy demand is expected to increase eight fold by 2020 due to an increase in population and energy requirements. helium-3 can help produce about $4 billion per tonne worth energy. The unique atomic structure of helium-3 promised to make it possible to use it as fuel for nuclear fusion.edu/Pubs/E-project/Available/E-project-031306-122626/unrestricted/IQP. Since then.html GR) If mined and brought back to Earth. It also stands as a great source of fusion power because of its unique atomic structure. Against this reality. the process that powers the sun. oil production is expected to peak within the next decade and. the low radioactive waste emission and the safety of a He-3 fusion reaction are very attractive attributes when compared to the high safety risks inherent in fission reactors used in nuclear power plants today. of course. Dissertation. WORCESTER POLYTECHNIC INSTITUTE. On the other hand. Diana.3 would become the primary energy source to power the United States and that it would become so before the end of the fuel era. HARVESTING HELIUM-3 FROM THE MOON. it would seem this country has an initial advantage. Deep. they would enter in direct competition with the US for He-3.pdf] A more likely scenario from a technical standpoint. Kulcinski) is a long term venture.OIL DA Varsity Link – He-3 – price drops Lunar mining will drive down oil prices. Worcester Polytechnic Institute [Marsha. which even according to experts in the field (see interview with Dr. Under this scenario India and China would again be the dominating economies within the developing countries. If we suppose that He. Souza. if China and India develop their own He-3-Deuterium reactors. These nations also have the greatest projected need for fuel. however. Because the reactor is most highly developed in the United States. Otalvario & Singh. 6 . 217-2006. is to bring He-3 from the Moon to Earth to be reacted in the plasma reactors. since they have the resources to purchase the largest amounts in a fuel market governed entirely by demand and supply dynamics. 18 . http://www.Professor. This would allow developing nations to purchase larger amounts of oil which could lead to their faster development.wpi. This would allow use of the existing gridlines for delivering electricity and would eliminate the production of H2 as an intermediate agent. this would imply that the fossil fuel prices would plummet since the primary consumer would be out of the game. In what manner this competition will be carried out depends largely on how closely these countries abide to international treaties and on how much they are willing to cooperate with one another. This scenario presupposes that the He-3-Deuterium reactor is fully developed.edu/Pubs/E-project/Available/E-project-031306-122626/unrestricted/IQP. He-3 also has long term and short term benefits for society. energy all competitive in the short term. 2004). 2004). synthetic fuel applications. 2004). It can also be used for environmental restoration. detection of chemical and radioactive wastes. The developed world would no longer have to depend on the Middle East . 19 . Two liters of He-3 would do the work of more than 1. Another goal of the current White House administration is that NASA returns to the Moon by 2015 and to have a permanent living settlement for astronauts by 2020. where the most of the world’s fossil fuel reserves are located.000 tons of coal (Chowdhuri. WORCESTER POLYTECHNIC INSTITUTE. The completion of this project will greatly increase the working research on the lunar mining of He-3 as the astronauts can experiment on different techniques to extract He-3 from the Moon’s regolith. Worcester Polytechnic Institute [Marsha. cancer therapy and defense. hydrogen production. base load electrical power plants and small electrical power plants (Kulcinski. 2-17-2006.wpi. A useful product of He-3 fusion reactions is the production of isotopes that are very useful in the biomedical field. Dissertation. 6 . In the long term it can have applications in propulsion technology. 2001). Deep. Souza. HARVESTING HELIUM-3 FROM THE MOON. For intermediate term applications. This would then open the ground for further cost reduction and prepare He-3 fusion to enter the energy marketplace at competitive prices. it can be used for the destruction of toxic fissile materials. The International Space stations could be used a trade center for the distribution of He-3 for world wide distribution. American scientists have already declared that the Moon could be the Persian Gulf of the present century.OIL DA Varsity Link – He-3 – alt energy He3 research spinoffs are massive . By using He3 isotopes we can reduce the radioactive exposure to patients compared to the regular isotopes that are used in PET that emit radioactive waves (Hurtack. it can help in medical research. He wants to complete the International Space Station by the year 2010. The advantage of initially using He-3 fusion for non-energy applications is that the cost base is different for specialized applications and He-3 can be competitive in the short run.Professor. President Bush released his new vision of space exploration. In 2004. Positron Emission Tomography (PET) is one such field.edu/Pubs/E-project/Available/E-project-031306122626/unrestricted/IQP. Diana.pdf] The United States leads the research in He-3. This process uses the isotopes from He-3 fusion reaction like He-4 in its working.biotech. Otalvario & Singh. He-4 has a much longer half-life and it can be stored for a much longer periods of time compared to other isotopes. for its energy supply. In the near term applications. This initiative would help tremendously in the progress in the He-3 research if a permanent colony is established on the Moon (Hurtack. http://www. to harness space power and to supply energy to remote energy stations. President Bush has allocated 12 million dollars to the Moon Development Initiative. OIL DA Varsity ***Internal Links*** 20 . it becomes easier to understand why nations as powerful and technologically advanced as Japan. Britain. In this bleak context. energy expert and writer for Harpers. 93-4 So embedded has oil become in today’s political and economic spheres that the big industrial governments now watch the oil markets as closely as they once watched the spread of communism — and with good reason: six of the last seven global recessions have been preceded by spikes in the price of oil. about energy for the future. For this reason.OIL DA Varsity Internal Link – Perception Any shift in prices triggers the impacts. energy-intensive global economy. the most important day of the week for oil traders anywhere in the world is Wednesday.2004. 21 . as one analyst puts it. market. no decision of any significance is made without reference to the U. pg. Department of Energy releases its weekly figures on American oil use.” they are not talking about depletion curves.perception of oil markets is the key internal link Paul Roberts. and fear is growing among economists and policymakers that. consumption. when nations discuss energy security today. energy expert and writer for Harpers. Rather.S.” Perception matters Paul Roberts. and alliances necessary to keep oil flowing steadily and cheaply through the next fiscal quarter. or about the much-touted energy security. Indeed. what they are really talking about is the geopolitics of energy — and specifically. or solar power. pg. or a hydrogen economy.S. The End of Oil. and when. the actions. “the market makes up its mind whether to be bearish or bullish. every oil state and company in the world keeps an unblinking watch on the United States and strains to find a sign of anything — from a shift in energy policy to a trend toward smaller cars to an unusually mild winter —that might affect the colossal U. the world’s oil players watch the American oil market as attentively as palace physicians once attended the royal bowels: every hour of every day.S. when the U. nor is anything left to chance.2004. or any of the potentially significant but speculative sources of energy. The End of Oil. money. when the major nations speak of energy policy today. and the United States have such abysmal records when it comes to long-term energy planning or alternative energy. 95 Within the oil world. They are not talking about fuel efficiency. in today’s growth-dependent. Indeed. or fuel cells. oil price volatility itself may eventually pose more risk to prosperity and stability and simple survival than terrorism or even war. energy security.nrel. 2) accelerated renewable energy and energy efficiency technology cooperation. leadership in key international forums and three key implementing strategies: 1) revitalized U.000 new jobs by 2020. along with $10 to 50 billion/yr. Strengthening U. environmental. Leadership of International Clean Energy Cooperation. The United States will not succeed in implementing these actions alone and must actively engage developed and developing country partners and international institutions.S. Such a global clean energy market transformation is a necessary critical step in reducing worldwide greenhouse gas emissions by 50-80% by 2050.S. Industry and NGO stakeholders have identified a portfolio of high-level strategies and actions that will enable the United States to spearhead international clean energy cooperation and capture these benefits. This effort includes foundational measures to establish a cohesive government-wide action plan and reassert U. It also will foster revitalized economic growth and sustainable development in all regions of the world and ensure that all citizens worldwide have access to modern energy services.pdf] The United States has an unparalleled opportunity to lead a global clean energy market transformation that will yield vital economic.S. and 3) partnerships with major developing countries and others to transform clean energy markets. Furthermore. clean energy investment-facilitation programs. which is necessary to prevent dangerous climate change impacts. in additional savings from reduced oil prices and other critical economic and energy security benefits. in new clean energy exports and 750.S. the United States cannot afford to wait—it must seize the opportunity now to spark a worldwide transition to a brighter clean energy future. 22 . http://www. together with other partners. Concerted U. action. December 2008. could generate up to $40 billion/yr. and development benefits for the United States and the world as a whole.gov/international/pdfs/44261.OIL DA Varsity Internal – US spurs international action US action spurs international action NREL ‘8 [National Renewable Energy Laboratory. Masters candidate in Public Policy at Harvard’s JFK School of Government. specializing in development economics and international trade. high-cost. Thus.S. This will put considerable downward pressure on prices over time as oil exporters adjust to a situation of extended excess supply-at least while total global oil reserves remain relatively plentiful. Together. partially offsetting the cost of the tariff. while growing demand from China and India would partially offset declining American demand. oil-dependent economy is likely to unfold. b. Finally. major OPEC suppliers would have room to lower prices given their lower relative cost of production. as industries and generators begin to shift away from higher-cost imported oil. begins to substitute away from oil as a key energy input in the long-run. Given that America is one of the world’s largest energy importers (importing roughly 2/3rds of its annual consumption). global aggregate demand for oil will inevitably decrease. assuming that emerging market demand doesn’t continue to grow at its current pace in perpetuity. March 25.freedom24. domestic oil producers might begin building out untapped Arctic capacity and utilities might begin diversifying their energy portfolios into lower-cost fossil fuels and alternative energy technologies. In the long-run. as the U. This progression is an example of a typical “adjustment lag”. in the very short-term we might expect a modest decline. these processes should cause a more substantial decline in import volumes. it would still need to source oil externally or risk seizing up its industrial capacity. 23 . Over the mid-to-long-term. http://www. aggregate import demand would remain relatively stable and prices would likely settle somewhere between $75 and $100.org/rationalpost/2008/03/25/speculations-on-a-25-oil-tariff/) In the mid-term.OIL DA Varsity Internal – development lowers prices Development of alternative energy causes prices to drop DeCiantis ’08 (Devin. a more fundamental shift away from a high-carbon. at which point oil imports would begin to decline more precipitously as demand for energy is almost completely replaced with lower-cost substitutes. The world price of oil? Again. OIL DA Varsity ***Russia impact scenario*** 24 . Great-power wars are potentially too destructive not to do everything possible to avert them. And. certainly alarming Armenia and Russia. http://www. even a low risk outweighs Robert Art (Prof IR – Brandeis U) 2003 A Grand Strategy for America. In that connection.S. is not an existential risk. For example. 73 Precisely because Turkey is a NATO ally. we should treat Eurasian great-power wars the same way we do NBC terrorism. But this ambivalence about committing forces and the dangerous situation. The greatest danger lies in areas where (1) the potential for serious instability is high. Hence commitments involving the use of nuclear weapons to prevent a client’s defeat are not as well established or apparent. Unfortunately.com/existential/risks. 71 In 1993 Moscow even threatened World War III to deter Turkish intervention on behalf of Azerbaijan. between India and Pakistan for instance.-Azerbaijani military cooperation and even training the Azerbaijani army.S. It’s the most probable scenario Stephen Blank (Prof Research – Strategic Studies Institute. Washington’s well-known ambivalence about committing force to Third World ethnopolitical conflicts suggests that U. and.[4] Russia and the US retain large nuclear arsenals that could be used in a future confrontation. many Third World conflicts generated by local structural factors have a great potential for unintended escalation. Azerbaijan and Georgia’s growing efforts to secure NATO’s lasting involvement in the region. into Ukraine where NATO recently held exercises that clearly originated as an anti-Russian scenario. Yet the new Russo-Armenian Treaty and AzeriTurkish treaty suggest that Russia and Turkey could be dragged into a confrontation to rescue their allies from defeat. to demonstrate the U.army. Clarity about the nature of the threat could prevent the kind of rapid and almost uncontrolled escalation we saw in 1993 when Turkish noises about intervening on behalf of Azerbaijan led Russian leaders to threaten a nuclear war in that case. where Turkey is allied to Azerbaijan and Armenia is bound to Russia.pdf) Washington’s burgeoning military-political-economic involvement seeks. Military Engagement with Transcaucasia and Central Asia”.S. 72 Thus many of the conditions for conventional war or protracted ethnic conflict in which third parties intervene are present in the Transcaucasus. In this regard. foster a polarization along very traditional lines. create the potential for wider and more protracted regional conflicts among local forces. US Army War College) 2000 “U. (3) neither recognizes that the other’s perceived interest or commitment is as great as its own. great-power wars are highly destructive. and the same way we treated the possibility of a general nuclear war between the United States and the Soviet Union during the Cold War: we should take multiple measures to prevent them and to limite them if they should break out. not left to chance. www. military power will not be easily committed to saving its economic investment.OIL DA Varsity 2nc impact – Russia War War involving Russia outweighs: It’s the only existential nuclear war Nick Bostrom (PhD Philosophy – Oxford U) 2002 Existential Risks. 25 . 69 And Washington is also training Georgia’s new Coast Guard.nickbostrom. great-power peace should be over-determined. (5) neither has willing proxies capable of settling the situation. 70 However. An allout nuclear war was a possibility with both a substantial probability and with consequences that might have been persistent enough to qualify as global and terminal. As Richard Betts has observed. 212-3) Fourth and finally. coupled with Russia’s determination to exclude other rivals. The real threat of a Russian nuclear strike against Turkey to defend Moscow’s interests and forces in the Transcaucasus makes the danger of major war there higher than almost everywhere else. (2) both superpowers perceive vital interests. either accidentally or deliberately. not only to the participants and their immediate neighbors. One or another big power may fail to grasp the other side’s stakes since interests here are not as clear as in Europe. p. inter alia. Secretary of Defense William Cohen has discussed strengthening U. Note however that a smaller nuclear exchange. Russian nuclear threats could trigger a potential nuclear blow (not a small possibility given the erratic nature of Russia’s declared nuclear strategies).strategicstudiesinstitute. Big powers often feel obliged to rescue their lesser proteges and proxies.S. Today. There is also a risk that other states may one day build up large nuclear arsenals. but their costs may be extremely high. but also to world order and stability. There was a real worry among those best acquainted with the information available at the time that a nuclear Armageddon would occur and that it might annihilate our species or permanently destroy human civilization.mil/pdffiles/pub113. we shall see that nuclear Armageddon and comet or asteroid strikes are mere preludes to the existential risks that we will encounter in the 21st century. (4) both have the capability to inject conventional forces.html) A much greater existential risk emerged with the build-up of nuclear arsenals in the US and the USSR. ability to project military power even into this region or for that matter. Such a war might however be a local terminal risk for the cities most likely to be targeted. they may be low-probability events. since it would not destroy or thwart humankind’s potential permanently. which designates the energy sector as the engine of economic growth. This revenue represents a substantial proportion of the country's gross domestic product export earnings. Still. The sensitivity implies a one dollar rise (drop) in the price of a barrel of Russia's urals blend benchmark leads to an increase (decline) in real GDP growth of about . in May 2003. Gawdat Bahgat (Centre for Middle Eastern Studies. and that in the case of a fall in the price a crisis will affect both the state and private sectors. A delicate process of restructuring and diversification is underway. Finance Minister Aleksey Kudrin has said during a visit to Washington. in 2002. "Russian finance minister warns of effects of possible oil price fall" April 12. Russia's real GDP growth since 1999 has been an impressive 6. Drop in prices crushes the Russian economy BBC Worldwide Monitoring. energy accounted for almost 20 percent of russia's gdp and 55 percent of export revenue. This strong recovery after the 1998 crisis can be explained by favourable external conditions in the form of high oil prices. the Russian economy is heavily dependent on oil revenue. The Russian government released its energy strategy to 2020. Indiana U of Penn. Put differently. He said that at the moment the country's economy is seriously dependent on the oil price.OIL DA Varsity 2nc Prices Key Russia High oil prices key to Russian economy – each 1 dollar drop causes a 5 billion dollar loss. 133 Since the collapse of the Soviet Union. Dept Political Science.5 percentage points and contributes to an estimated US $5 billion in extra earnings (losses). spurred strong growth in GDP and contributed to the overall economic recovery. as well as the effects of the sharp 1998-99 rouble devaluation/ Not suprisingly. The relatively high and stable oil prices since 1999 brought a windfall in oil export revenue to the Russian economy. 2008 lexis [Presenter] A fall in the oil price could inflict a serious blow on the Russian economy.) 2004 OPEC Review “Russia's oil potential: prospects and implications” v28 i2 p. from a state-run economy to a free-market one. 26 . These figures indicate Russia's economy is extremely sensitive to global energy price fluctuations. the Russian economy has been in a state of transition.6 per cent per year. Even a temporary end to the oil boom would dry up the Russian economy – best new studies Paavo Suni (analyst for the Research institute of the Finnish Economy) 2007 “Oil Prices and the Russian Economy: Some Simulation Studies with NiGEM.repec.org/p/rif/dpaper/1088. in the Figure 12. gas and other minerals) accounted for 19 per cent of Russia’s GDP at basic prices in 2001 when measured as a share in factor income by sectors. 2005).OIL DA Varsity Answers to: “Russia Economy is Resilient” 1.html The temporary end of the current commodity boom would cause serious difficulties in the Russian economic development as the fuel for the engine would dry. However.” Elinkeinoelämän Tutkimuslaitos discussion papers. Thereafter the difference with respect to the baseline scenario starts to decline. oil.” Elinkeinoelämän Tutkimuslaitos discussion papers. Not TRUE – 1NC National Interest and David evidence indicates that high oil prices are vital to sustainability. more openness in the economy and the use of oil fund would serve as an important impetus to raise the productivity and the competitiveness of the production outside the energy sector in the longrun. The current-account surplus will still remain larger than without the oil price shock.html According to the results. Here. 2. also the other way around. Thus the economy is vulnerable to a possible decline in oil prices as the process functions. (See also Kaitila and Suni. fuel industry (i. coal. which can be seen e. Even if the economy is normally resilient.) 27 .5 per cent of Russia’s GDP. pdf downloaded from http://ideas. According to the GTAP database. The more robust growth would necessitate drastic changes in the economic structure from resource based economy towards more normal economic structure. it can’t be without high prices to generate revenue and provide a safeguard. There is also a hike in consumer price inflation. the current account balance will naturally improve pronouncedly in 2007 but the effect will start to diminish rather quickly as higher domestic demand will increase imports and the value of GDP will grow. which also will soon start to diminish. pdf downloaded from http://ideas.org/p/rif/dpaper/1088. The official statistics tend to underestimate the share. the share of oil and gas in Russia’s GDP in 2002 was 25 per cent.” Elinkeinoelämän Tutkimuslaitos discussion papers. 2007. Also as a result of higher oil prices. The current-account-surplus-to-GDP ratio will also start to decline rapidly after a jump. recent Russian policies to support the monopolistic nature of the energy sector as well as export duties raises the vulnerability of the economy to decline in the raw material prices and especially those of the energy may undermine the ground behind normalisation of the economy. but it will not vanish completely during the 20-year simulation period. The size of the effects were fairly similar with some differences in timing. the share of the fuel industry3 is some 5. The recent success in WTO membership negotiations is a good signal in this direction. Oil accounts for too much of the economy -– it’s a full 30% of GDP – Russia cannot bounce back from that Paavo Suni (analyst for the Research institute of the Finnish Economy) 2007 “Oil Prices and the Russian Economy: Some Simulation Studies with NiGEM. There is a danger that while energy effects dominate the Russian economic development.html The share of oil and other energy production in Russia’s total GDP is difficult to estimate. 3. In the long-run output is higher. 4. In a longer term.g.repec. in principle. as quoted by Juurikkala and Ollus (2006). High oil prices must be sustained – loss will wreck the economy Paavo Suni (analyst for the Research institute of the Finnish Economy) 2007 “Oil Prices and the Russian Economy: Some Simulation Studies with NiGEM. risen net foreign assets and by the effects of the change in prices on labour market equilibrium. for a discussion of this issue. the deflator will be unchanged with respect to the baseline by 2012. and the scale of the effect depends on the importance of commodities in output and the size of the increase in prices. According to the Russian government. pdf downloaded from http://ideas. Effects are driven by changes in export income. Openness of the economy would provide the necessary competition to check the price structures and give correct price signals to the non-resource economy for its development. According to World Bank (2004. At that point the level of domestic demand will be 8 per cent and that of GDP almost 5 per cent higher than in the baseline scenario. the sudden and permanent positive oil price shock will raise Russia’s domestic demand and GDP rapidly for the first three years up until 2009. According to Russian statistics. We checked the effects also using forward expectations.org/p/rif/dpaper/1088. These results indicate that any oil price increases will fade relatively quickly if there are no further price increases.repec. Using forward expectations did not change the overall picture. the need to create fruitful circumstances for the growth of the non-oil sector is seriously underestimated as the short term gains from higher energy prices are so large. the energy sector accounted for 30 per cent of the Russian GDP in 2005.e. OIL DA Varsity 28 . OIL DA Varsity ***A2 high oil bad*** 29 . something that politicians are increasingly flirting with as energy prices continue to climb and put into question a panoply of government programs. everything (including labour!) save for oil. at the launch of the BP Statistical Review of World Energy 2003. the health of the economy is not held hostage to oil markets. 3. According to CSFB. and all economists agree no impact Jerry Taylor and Peter Van Doren (senior fellows at the Cato Institute) October 17 2007 “No need to fear oil shocks. It underscores the danger of the price-control regimes of the 1970s. which accounted for all of the increase in oil demand last year. were skeptical of that proposition. They argued that the "better" monetary policy advocated by Bernanke et al. They argued that different ("better") monetary policy -.5% of the rise in global primary energy consumption.The underlying factors for the trend include a significant 1. This reduces the demand for. 4. Consuming nations were not required to tap their emergency reserves. Oil Prices would have to rise to 200 dollars a barrel to hurt the economy Sunday Times 8/15/04. Moreover. the net effect of all this -. with current structures able to maintain oil supplies without excessive price spikes during the Iraqwar and unexpected disruptions. That would be uncharted territory and is not remotely on the agenda. As long as oil producers are spending and/or investing their increased profits. an unlikely proposition. Adding these two bits of information together produces an interesting result.more specifically. prices are sustainable. The main dissenting view was most strongly forwarded by then Princeton University economist and now Federal Reserve Board chairman Ben Bernanke and his colleagues. BP's chief economist. simply make oil producers richer. 30 . now chaired by Ben Bernanke. that’s 1NC Daily Times. unless the Federal Reserve accommodates everyone's demand for money. "Producers were able to meet the needs of oil consumers during the Iraqwar and during unplanned supply disruptions in Venezuelaand Nigeria. The economy's failure to respond to one of the steepest oil-price increases in history with a recession. Peter Davies. something that is probably not possible in the real world. however. That was the state of the debate until the most recent price shock. the Federal Reserve.OIL DA Varsity Answers to: “Oil Shocks” 1. rather than raising it in the face of an oil shock -. it will be in response to bad news in the housing market. In Britain the decline has been even more pronounced -the oil intensity of GDP is only 40% of what it was three decades ago. Davies said oil markets proved resilient and flexible. sent economists back to the theoretical drawing board. Interestingly enough. and everyone else poorer. The exception was China." he said. the Federal Reserve would have to keep the funds rate below levels anticipated by market actors for 36 months in a row. after all.” National Post Although oil prices hit US$80.could reduce or even eliminate the recessionary effect of oil shocks. The lesson to be derived from this is pretty clear: While oil-price spirals are certainly nothing for consumers to celebrate. All the new analyses agree that the more flexible economy that we have now allows us to cope more easily with oilprice shocks. and thus the price of. <Oil soars again. If wages and consumption rates outside the oil sector fail to go down. 2.from a macroeconomic perspective--is zero. either unemployment will follow or inflation will result. unemployment and recession that supposedly follow oil-price shocks are nowhere on the macroeconomic radar screen. more money spent on oil equals less money spent on everything else. Britain particularly so. energy-intensive manufacturing means that OECD countries use just over half as much oil for a given level of gross domestic product (GDP) as in 1970. Higher oil prices. If the economy goes into a tailspin. but no need to panic just yet L/N> The Bank also pointed out that all advanced economies have become less sensitive to oil. Economists James Hamilton and Anna Herrera. however. As a result. the inflation. The disadvantage does not argue that oil shocks are good. The decline of heavy." while global production capacity "comfortably exceeds" demand. All of this will eventually happen. of course. this does not mean we use less oil now. is not pursuing the policies advocated by its chairman when the chairman was in the academy. the highest-ever oil price. said Tuesday in London. For high oil prices to have the same effect on the economy as in the 1970s we need to adjust both for the fact that real oil prices were higher in the past and that economies were more oilsensitive. it means that oil consumption has risen much more slowly over time than GDP. which is. Over the long run. was $ 95 a barrel in the late 19th century. because there's only so much money to go around. in today's prices. effectively calls for massive declines in the federal funds rate over the entire course of an oil shock. I calculate that it would need an oil price of just over $ 200 (£110) to produce the same kind of inflationary and recessionary shocks as in the past. The orthodox view that governed our understanding of oil-price shocks until recently was that the economic damage associated with those shocks was not the result of oil-price increases per se. but the length of time required to get oil consumers to adjust their behaviour in response to a price shock is what was thought to trigger the economic downside associated with an oil crisis. Diversity cushions shocks International Oil Daily June 10 2003 HEADLINE: Diversity of Oil Market Helps Cushion Against Price Shocks: BP World oil supply is becoming "more diverse. Just to be clear. just that stable high prices are – no shocks now.45 million barrel per day increase in non-Opec oil output last year. one that maintains the federal funds rate at a constant level. Shocks have zero effect on the economy – we just had one. and 68. not the oil market. coupled with largely flat demand growth. During 1973-81.” Oil and Gas Journal. 3. Energy economist and consultant. Meanwhile.experienced very large and rapid increases in solvent demand for their export goods. not the reverse. certainly up to the range of about $ 60/bbl. the NICs Taiwan. In easily described macroeconomic terms. South Korea. This is through the income. and agrocommodity exporter countries. effect on oil exporter countries. This is the main reason why demographic oil demand during 1975. the revenue effect of higher oil prices "greasing economic growth" was and is much stronger than the price effect on industrial producers. their oil import trends during 1974-81 show dramatic growth only slightly impacted by the major price rises of the period. Impact outweighs the impact turn – High oil prices are key to the Russian economy which will collapse without it. we find that crude oil import prices and bulk gas supply prices have risen more than 200%. then world oil demand in 2003 would have been 95. High prices improve global growth—exporting countries re-invest their revenues in global manufacturing and service sectors—this is comparatively stronger than the price effect on industrial producers. It should be clearly understood that if the demographic demand rate in 2003 was the same as in 1979. outside the member countries of the Organization for Economic Cooperation and Development. Energy economist and consultant. due to prices of their export products increasing in line with the oil price. claimed economic growth of the US economy was running at more than 7% on an annual basis in late 2003. or revenue. Lexis. 2. It is therefore not difficult to argue that sharply rising oil and gas prices in fact increase economic growth rates. minerals.OIL DA Varsity Answers to: “Hurts the Economy” 1. the New Industrial Countries (NICs) of that period -.” Oil and Gas Journal. NICs as a group or bloc of economies rapidly expanded their oil imports and increased their oil consumption as prices increased in 1974-81. “A counterintuitive notion: economic growth bolstered by high oil prices. more than three times Russia's export offer. “A counterintuitive notion: economic growth bolstered by high oil prices. and then on metals. High prices increase global growth—trends prove. because demand for their export goods had increased. or well above five times Venezuela's current export capacity. was significantly higher than it is today. Andrew McKillop. most of them low income (per capita gross national product below $ 400/year). There is no certainty at all that world oil supply would or could have been able to meet this demand. Higher oil prices operate to stimulate first the world economy. Relative to real total world oil demand at this time (about 78 million b/d). Lexis. Comparing oil and natural gas price averages in the US in late 1998 with price averages in late 2003.notably the so-called "Asian Tigers" Taiwan. due to the global economic impacts of higher oil and "real resource" prices. and Singapore increased their oil demand by about 60-80% in volume terms in this period of a 405% increase in nominal prices (Table 2). For the much smaller NICs of 197585. with oil prices at $ 40-65/bbl in 2003 dollars. and then lead to increased growth inside the OECD. and Iran. in which oil price rises before inflation were 405%. Pakistan. The real impact of higher oil prices. destroying global security and spreading economic instability. 4/19/2004. Almost all such countries have very high marginal propensity to consume. In general terms. Brazil. 4/19/2004. the additional capacity needed would be close to two times Saudi exports. The standard comment that "high oil prices hurt economic growth" is totally undermined by real-world and real-economy trends. is to increase economic growth at the composite worldwide level. 31 . This has very strong implications for oil demand of today's emerging and giant NICs with large populations and immense internal markets: China. South Korea. Andrew McKillop. That is to say that any increase in revenues. that’s 1NC David. and Singapore -.4 million b/d. strong oil demand. strong oil demand. India. is very rapidly spent on purchasing manufactured goods and services of all kinds. Scott Bennett and Timothy Nordstrom. It is at these times that the pressure to cut military investment will be greatest and that state leaders will be forced to recognize the difficulty of continuing to pay for a rivalry.” Journal of Conflict Resolution. leading to safer disputes or at least to leaders believing that they can control the risks of conflict when they initiate a new confrontation. Department of Political Science Professors at Pennsylvania State. Leaders may choose to negotiate a settlement that ends a rivalry to free up important resources that may be reallocated to the domestic economy. Conflict settlement is also a distinct route to dealing with internal problems that leaders in rivalries may pursue when faced with internal problems. When engaging in diversionary actions in response to economic problems. the presence of disputed issues also provides a casus belli with the rival that is always present. February 2000. Over the course of many confrontations. when confronted with domestic problems. This makes weak states particularly inviting targets for diversionary action since they may be less likely to respond than strong states and because any response they make will be less costly to the initiator. states should avoid conflict initiation against target states experiencing economic problems. This gain (a peace dividend) could be achieved at any time by ending a rivalry. rival states may learn to anticipate response patterns. leaders in a rivalry have the clear alternatives of escalating the conflict with the rival to divert attention or to work to settle the rivalry as a means of freeing up a substantial amount of resources that can be directed toward solving internal problems. rivals provide good targets for domestically challenged political leaders. Hypothesis 2: Poor economic conditions increase the probability of rivalry termination. 5. Hypotheses 1 and 2 posit opposite behaviors in response to a single cause (internal economic problems). which is as follows: Hypothesis 1: Poor economic conditions lead to diversionary actions against the rival. Military competition between states requires large amounts of resources.7 In particular. This leads to our first hypothesis.a state facing poor economic conditions may in fact be the target of an attack rather than the initiator. such a gain is likely to be most important and attractive to leaders when internal conditions are bad and the leader is seeking ways to alleviate active problems. the presence of a clear rival may offer unstable elites a particularly inviting target for hostile statements or actual conflict as necessary. they demand a research design that can account for substitutability between them. and rivals require even more attention. believable actors for leaders to target. Rivals also may provide a target where the possible costs and risks of externalization are relatively controlled. Leaders may hope to catch an economically challenged rival looking inward in response to a slowing economy. 32 .OIL DA Varsity Answers to: “Hurts the Economy” 4. Among other things. This may be even more likely in the context of a rivalry because rival states are likely to be looking for any advantage over their rivais. it is quite rational for leaders to reduce costs by ending a rivalry. Scott Bennett and Timothy Nordstrom. Ebsco. If the goal is diversion. D. leaders willwant to divert attention without provoking an actual (and expensive)war. In a “guns versus butter” world of economic trade-offs. Following the strategic application of diversionary conflict theory and states' desire to engage in only cheap conflicts for diversionary purposes. quick victory that gives them the benefit of a rally effect without suffering the long-term costs (in both economic and popularity terms) of an extended confrontation or war. As such. The public and relevant elites already consider the rival a threat or else the rivalry would not have continued for an extended period. In sum. Even if diversionary conflicts occur they won’t escalate. In the case of the diversion option. leaders will be most interested in a cheap. this argument also encompasses the view that the cold war ended because the Union of Soviet Socialist Republics could no longer compete economically with the United States. Rivalries are an appropriate set of cases to use when examining substitutability both because leaders in rival states have clearly substitutable choices and because rivalries are a set of cases in which externalization is a particularly plausible policy option. However. February 2000. D. No impact to economic collapse—lack of resources prevents military competition. Department of Political Science Professors at Pennsylvania State. “Foreign Policy Substitutability and Internal Economic Problems in Enduring Rivalries. Following Blainey (1973). Support for policy change away from continued rivalry is more likely to develop when the economic situation sours and elites and masses are looking for ways to improve a worsening situation. we focus on using economic conditions to understand when rivalries are likely to escalate or end. “Foreign Policy Substitutability and Internal Economic Problems in Enduring Rivalries. rivals provide logical.” Journal of Conflict Resolution. when a state can no longer afford to pay the expenses associated with competition in a rivalry. In this analysis. Ebsco. The happy confluence may continue. over 6% in 1980. to finish at $81. Energy Department figures show. And services. which require less energy than manufacturing. correspondents for the Wall Street Journal. it seems clear. dollar.OIL DA Varsity Answers to: “Hurts the Economy” 6. [Dartmouth’s card ends] For all the concern. 20.32 a barrel and has stayed above $80 most days since. How well could it survive $100 a barrel? The answer is quite well -.50 from Wednesday. For every extra dollar taken from drivers' pockets at the pump in the form of higher prices in recent years. Consumer spending has been the primary engine of growth in the U.S. or 1.S. Oil-rich nations would need to pump their profits back into U. though fears remain strong that high energy prices will tip the U. they say. the record high for oil was nearly $102 a barrel early in 1980. Cheap retail goods offset the costs of $100 oil Fritsch and Evans. Adjusted for inflation. down from an earlier expectation of 4% to 6% growth. High oil prices could lead to ugly consequences if they hit consumers' pocketbooks -.S. accessed October 19 2007) The world economy has managed. U. many industries became more efficient in their use of fuel. was among the major retailers in the last week cutting sales forecasts. Some economists do say that high-price oil has been a strain on the economy in the last few years.22. Overall. On Friday in New York.” International Herald Tribune. became a far bigger share of the economy.S. The record was set in 1980. 7.S. Target Corp. September 29 2007 (“How Economy Could Survive Oil At $100 A Barrel. ProQuest. including tight oil supplies and a weak U.5% to 2. a little more than $2 off the all-time high. into recession. has been hard to see. Increased efficiency means no impact to expensive oil Grynbaum. and European economies.” The Wall Street Journal. Driven by higher prices. But the effect may have been to shave a bit off an otherwise healthy growth rate. Some analysts continue to believe that oil is destined to reach an all-time high. The price rise would probably have to be gradual. in recent years.S. economy full of uncertainties for world oil market. of more than $101 a barrel. Two important trends reinforced each other. is that the economy has become less sensitive to energy prices than it was in the 1970s. so the impact. to swallow the rise of oil prices past $80 a barrel. October 6 2007 (Michael. Target expects September sales at stores open at least a year to rise just 1.66.5%.S. economists said. The main reason has to do with what some call the Wal-Mart effect. low-cost exporters from China and elsewhere have put roughly $1. U. “U. Inflation couldn't get so bad as to force big interest-rate hikes. the world today is better equipped to swallow expensive oil than it was when Jimmy Carter was installing solar panels and a wood-burning stove in the White House.50 back in the form of cheaper retail goods. ending Thursday at $81. the benchmark crude-oil futures price closed down $1. All of this has happened so far.S. finance writer for the New York Times. Part of the reason that costly oil has not done too much damage. but that price level did not last long. as measured in today's dollars. Even at today's nearrecord prices. [Dartmouth’s card begins] A host of factors. with some indigestion. vs. not adjusting for inflation. crude oil for next-month delivery settled at a record price of $83. where the housing slump is already hurting the economy.so long as several conditions still hold true. households today spend less than 4% of their disposable income at the pump. suggest that oil prices have further to rise.especially in the U.44. 33 . after the Iranian revolution. lexis) On Sept.5%. up $1.. the amount of energy needed to produce $1 of economic output has been cut nearly in half since 1980. " she says. the Fed was saying it was more worried about the fallout from credit-market gloom than about the risk of inflation. but insufficient to drive an economy into recession. reflect a fundamental shift in economists' understanding of how energy prices affect the economy. Unlike in the U. At a time of record energy prices.S. In China. other energy sources can make up for oil. such as those in 1980 following the Iranian revolution and the outbreak of the Iran. that view is fairly mainstream among central bankers. Current Fed chairman Ben Bernanke has spent a lot of time trying to understand such shocks..'s chief economist. Mr. the engine of growth on which many are counting.S. he analyzed the effects of sharp rise in prices during the oil shocks of 1973-75. By implication.S." Such sanguine views. China mainly uses oil in industrial settings.OIL DA Varsity Answers to “Hurts the Economy” 8. Yergin asked the former Fed chief on stage if $80 oil was a concern. while they are far from universal. In 1997. says independent energy economist Philip Verleger Jr. "He basically shrugged and said. These are significant effects.” The Wall Street Journal. 34 . correspondents for the Wall Street Journal. resource reinvestment. That prompted the Fed to raise interest rates sharply in an effort to head off a spiral of inflation. a Union Pacific Corp." Mr. 'Not so far. "And that investment is happening. and economic consensus prove no impact to high prices Fritsch and Evans. ProQuest Strong growth in places like China helps take some of the edge off the oil-price blow for U. Historically. and European companies such as Detroit's Big Three auto makers. Economists see global growth slowing but still chugging along at a relatively healthy 3% this year and next. Investment Adviser Financial Times Business Limited. High oil prices also mean more money for oil-producing nations such as Russia and Saudi Arabia to invest globally. His surprising conclusion: The Fed's cure for high oil prices was worse than the disease. however. that's a risky but educated bet. "If resource owners are now getting a bigger piece of the pie to spend and invest." said Daniel Yergin. or to herald the return of high inflation. recession. September 29 2007 “How Economy Could Survive Oil At $100 A Barrel. 9-13-2004 A study by the International Energy Agency. with most of the rest coming from coal. Study shows no recession or high inflation from price increases. Growth in emerging markets is a "structural development" that is "less sensitive to oil-price changes. Chinese growth.4 per cent of GDP in the first and second years and inflation rising by half a percentage point. At a recent event promoting Alan Greenspan's new memoir.Iraq war. James Barnes. along with the Organisation for Economic Co-Operation and Development and the International Monetary Fund. where imported oil goes to fill people's gasoline tanks. a noted oil historian and chairman of Cambridge Energy Research Associates.'" Mr. would also exacerbate China's already serious pollution problem and speed up emissions of gases that contribute to global warming. oil prices have doubled or trebled in a matter of weeks because of sudden and sharp supply disruptions. Greater coal use. says Ellen Hughes-Cromwick. Ford Motor Co. China uses oil for only 21% of its energy needs. Many emerging markets are hitting a "takeoff" stage. Yergin recalls. Growing fuel efficiency could also blunt the blow of higher prices." he wrote. "There's a more relaxed attitude now. Today. "From a macro level. Bernanke's Fed recently responded to the subprime mortgage crisis by cutting benchmark interest rates for the first time in four years. "The majority of the impact of an oil price shock on the real economy is attributable to the central bank's response to the inflationary pressures engendered by the shock. 1980-1982 and 1990-91 in the Brookings Papers on Economic Activity. spokesman. where coal may be an alternative. then $100 oil shouldn't be a problem" in the absence of a U. says the railroad has bought more fuel-efficient locomotives and trained engineers to operate trains in ways that conserve fuel. found that a sustained $10 a barrel rise in the oil price would result in the OECD losing 0. where per-capita income reaches a level that sparks serious auto demand. we would anticipate that rising oil costs will make us more competitive [with trucks] and potentially drive more business our way. Barnes says. 9. Mr. OIL DA Varsity ***A2 finite oil*** 35 . 2011. Exxon Mobil (with almost 26 trillion cu. staff writer concerning oil and gas. 2011. ft.S. and Chevron. CJJ According to Ernst & Young’s 4th annual US exploration and production benchmark study. 3. 2. the strongest oil and gas reserve growth in the last five years. And there are a whole lot of prospects which were not found before which are worth looking for and worth developing today.” A lot depends.” said Adelman. as a way to take a measure of the US oil and gas landscape.” [1/2] 1.. “What peak oil? – US oil and gas reserves grew in 2010”. Geological Survey in 2000 estimated that some 3 trillion barrels of oil will ultimately be produced. That’s the kind of frontier you have.com/id/5945678/ Meanwhile.) No peak oil.” 36 . Occidental Petroleum. Morry Adelman. Improved technology was also a key factor. oil reserves grew by 11% to 17. says there is plenty of oil around as long consumers are willing to pay the price to produce it. While the sudden growth does not mean that global oil and gas reserves are not in a long term decline (the Peak Oil activities of 2010 do show that high commodity prices and improved technology can enable wellcapitalized major oil and gas players to identify and access more reserves in the short term. But I don’t know (how much oil) there is there.8 billion barrels in 2010 and natural gas by 12% to 174.) Impact outweighs – timeframe to Russian collapse is faster than the timeframe to running out of oil. on just how much oil remains underground. of course. followed by Chesapeake Energy. the natural gas production replacement rate.msn. A comprehensive study by the U.OIL DA Varsity Answers to: “We’ll inevitably run out.” 5. followed by Exxon prices. and sales of proved reserves was 234%. Adelman argues that the amount of oil left to be produced is “unknowable. Many of those who fear a production peak is imminent base their forecast on estimates of what geologists call the “ultimate recoverable resource” of about 2 trillion barrels of oil. and ConocoPhillips.9 billion in 2010 Mobil. theory). So-called 3D visualization. In 2010 the oil production replacement rate from discoveries.) New technology is the bomb : 3d visualization. "There are a lot of prospects that were not worth developing before which are worth developing now. deep sea exploration and horizontal drilling increase oil finds MSNBC 9/9/2004 http://msnbc. purchases. But there’s disagreement among geologists on that number. The report examined the US exploration and production results of the 50 largest oil and gas companies. Improved hydraulic fracturing (fracking) and horizontal drilling technology has increased shale oil and gas development and made for a major growth in reserve and/or production replacement rates. http://www. growing from $72.com/id/5945678/ There are skeptics to the production peak theory. the 4.com/2011/06/17/what-peak-oil-us-oil-and-gas-reserves-grew-in-2010/. technology is expanding the industry’s ability to find and extract oil – in some cases finding new fields once thought to be fully exploited.) Higher prices have made new development more economical and usgs reports indicate 3 trillion barrels exist underground MSNBC 9/9/2004 http://msnbc. Horizontal drilling has provided access to pockets of petroleum otherwise unaffordable or unreachable. Fueled by high commodity . extensions.msn.) topped the list of companies with major US natural gas reserves. accessed on July 3. improved recovery. It’s disorderly. especially in the short term – 2010 figures prove Stuart Hampton. ft.3 trillion cu. BP.) Doesn’t take out the disadvantage – Gradually running out of oil means the transition to alternative will be slow and stable and economies will be able to adjust.bizmology. The aff causes a fast transition which causes price instability and the Russian economy can’t adjust. an MIT economics professor. Advances in remotely operated vehicles (ROVs) are extending the reach of deep-water exploration and production further and further offshore. oil and gas companies more than doubled their capital expenditures (primarily property acquisitions) in 2010.8 billion in 2009 to $177. BP led the pack in 2010 with 2. “There are many offshore places that in the fullness of time will get explored. June 17th. “There’s no such thing as limitless.9 billion barrels of oil reserves in the US. ConocoPhillips. but the limits keep being expanded all the time. in widespread use for the past five years allows geologists to “see” underground formations with a degree of clarity and detail unimaginable a decade ago. and in fact nobody does. 252%. Anadarko Petroleum. revisions. sciencemag.org/cgi/content/full/304/5674/1114#affiliation Critics could note that new oil discoveries are only replacing one-fourth of what the world consumes every year (following a declining trend that began in the mid-1960s). in most cases. although they have discovered but not developed more than 50 new fields each.OIL DA Varsity Answers to: “We’ll inevitably run out. the technologies and techniques used are. The countries richest in oil have minimized their oil investments during the last 20 years. However. the real issue is that neither major producing countries nor publicly traded oil companies are keen to invest money in substantial exploration campaigns. and that increases in reserves largely derive from upward revisions of existing stock. mainly for fear of creating a permanent excess capacity such as that which provoked the crisis in 1986 (when oil prices plummeted to below $10/bbl). Moreover.” [2/2] 6. countries such as Saudi Arabia or Iraq (which together hold about 35% of the world's proven reserves of oil) produce petroleum only from a few old fields. obsolete. in countries closed to foreign investments. Leonardo Magueri (Senior Vice President Eni Spa) 5/21/2004 Science Magazine http://www. 37 . In fact.) Saudi Arabia and Iraq are only using 5 out of their 50 large oil fields nowDr. OIL DA Varsity ***AFFIRMATIVE*** 38 . OIL DA Varsity ***uniqueness*** 39 . In the oil world. predicted a temporary pullback.com/opinions/the-unpredictable-forces-behind-oilprices/2011/06/30/AG3e27tH_story. domestic gasoline prices have been rising and falling for years. (D-MA) says the move is a signal to OPEC that the United States will not be held hostage to high oil prices. the price of oil fell off a cliff. and if Middle East turmoil is enough to justify it. however. 2011. needs to develop political solutions that will have lasting effects on oil markets.html.Because oil prices fluctuate so much. Rep. Steven Mufson. President Obama said that there wasn’t a serious supply shortage and that rising oil prices weren’t reason enough to tap the nation’s Strategic Petroleum Reserve. On this week's Mix. only to sink to less than $40 a barrel by the end of that year.OIL DA Varsity Prices not stable Oil Prices unstable now Reuters. In March. to discuss the causes of high gasoline prices in the U. says the move by the president only proves that the country needs to increase domestic production.washingtonpost. Yet the physical amount of oil in the market didn’t change that week. (A Look Behind Unstable Gas Prices & Attempts to Fix Them. will he deserve blame? If it works. the surface was relatively calm. However. to ask why policymakers released oil from the SPR now. Poof! More than a tenth of the value of a barrel of oil disappeared. http://www. a believer in rising crude oil prices. If prices continue to drop. will we want him to do it again? 40 . instead of when prices were higher. Goldman Sachs. Sobhani says the release is not a long-term fix for high oil prices. and the U. will he deserve credit? If they rise. president of Caspian Energy Consulting. They hit a record of $147 a barrel in July 2008. he suddenly said that turmoil in Libya justified the largest-ever release of reserves. tumbling more than $10 a barrel. or unstable foreign sources of oil to supply American markets? Thalia interviews Congressman Earl Blumenauer (D-OR). and potential ways to the drive them down.reuters. chairman of the House Energy and Commerce Committee. oil prices are like a bad case of malaria — feverish one month and tolerable another. But a couple of signs of economic weakness spooked traders. Oil Prices are unpredictable Mufson. they always seem to get higher. He believes the same results would come from approving stalled permits for drilling in the Gulf of Mexico. and Congressman Michael Burgess (R-TX). amid intense fighting in Libya. what's behind the timing of the president's move? Thalia talks with Rob Sobhani. Such wild fluctuation makes it nearly impossible to discern: What is the right price for oil? Today’s crude oil prices are nearly 10 times as high as they were in 1998. Then.S. but in the long-term. without tapping into reserves he believes were meant for a true emergency. For consumers. LM) Rep. and twice as high as in 2005.com/article/2011/07/02/idUS6613098320110702. Fred Upton (R-MI). So what's driving the ups and downs? Is the main cause of volatile prices high domestic demand. who suddenly worried that demand would be less than they had expected. LM) On that Thursday alone. July 2 2011. Libya’s oil exports had been offline for more than two months. Then on June 23. Ed Markey. It was more of an economic stimulus than a national security measure. as they were doing before his move. July 1. http://www.S. it will be impossible to measure Obama’s success or failure. (The unpredictable forces behind oil prices. staff writer for Washington Post. June 23. staff writer.40 a barrel.OIL DA Varsity Prices decreasing Oil prices trending downward—adjusting to Libya Power and Tracy.” said Fadel Gheit. a leading investment bank. Oil's slide was continuing Monday on a volatile trading day. which includes the U. 6/27 (Ronald White. sending them to levels last seen in February. That’s the equivalent of about $56 million a day in savings at the gas pump — or about $20 billion a year.S. In New York trading crude oil was down $4.wsj. 41 . announced last week that government reserves would be tapped in a bid to reduce crude prices. June 23. Instead of betting on higher prices they have to bet on lower prices. 2011. despite the loss of Libyan oil. 2011. “The speculators will have to change their positions. according to Peter Beutel. The Paris-based IEA. “Gasoline prices should fall further as crude continues to slide”.msn.S. Oil prices declining overall—chasing out speculators and more reserve releases in the future Schoen. and oil analyst a Cameron Hanover. Removing those speculators from the market would eliminate the premium paid to cover the profits generated by investors.S.. SL) Crude oil prices are on such a slide that they could drop back into the low $80s a barrel. http://online. make up for the loss of Libyan oil on world markets and provide a boost to struggling economies." said American Petroleum Institute spokesman Bill Bush..com/business/economy/oil-prices-plunge-after-usallies-announce-release-of-reserves/2011/06/23/AGsANYhH_story. West Texas Intermediate crude. “This is the straw that breaks the camel’s back — this is the tipping point. AD: 7/3/11. was down an additional 56 cents to $90.msnbc. So anyone betting on a continued rise in oil prices runs the risk that Thursday’s release is just the first of many aimed at lowering prices.61 a barrel after falling as low as $89. AD: 7/3/11.50 a gallon in California. "Crude and gasoline inventories are above average. In other energy news. June 27. It’s about chasing oil speculators out of the market. Oil prices had already begun to ease in recent weeks after shooting upward in mid-February when the Libyan conflict intensified.latimes. causing fears of a supply disruption.html. SL) The decision by the U. “Oil prices plunge after U. 6/23 (John W. made little sense given current trends in the oil markets. Oil producers and refiners said the move by the U. “Surprise oil release targets speculators”.com/money_co/2011/06/retail-gasoline-prices-may-declinesharply-soon.html. The U. adding that this could reduce retail gasoline prices to about $3 a gallon nationally and to about $3.S. which markets have already adjusted to. the 28-member International Energy Agency announced a nation-by-nation breakdown of how much oil and refined products were going to be released from strategic reserves. http://today. staff writer for LA Times. staff writers for the Wall Street Journal. 2011. AD:7/3/11.html?mod=googlenews_wsj. benchmark has fallen 15% in the second quarter.01 to $91. 6/23 (Cezary Podkul. Wall Street analysts said. allies announce release of reserves”. 6/24 (STEPHEN POWER And TENNILLE TRACY. AD: 7/3/11. Schoen. more than 20 percent below peak levels of $114 hit in early May. crude oil prices plunged by more than $4 a barrel Thursday. Oil prices declining—benchmark steadily declining White. benchmark.com/article/SB10001424052702303339904576403830137675442. And it seems to be working.washingtonpost. SL) Thursday’s surprise release of 60 million barrels of crude reserves is not about keeping oil consumers well supplied. and other nations to tap petroleum stockpiles to attack high oil prices highlights the pressure President Barack Obama faces over gasoline prices and domestic drilling policy. and crude and gasoline prices have been trending down for weeks. June 24. After closing over $95 a barrel on Wednesday.40 to $3. http://www. SL) Oil prices tumbled to their lowest level in four months Thursday after the United States and 27 allies announced that they would release 60 million barrels of crude oil from reserves to offset the disruption of oil supplies from Libya. 2011. Oil prices dropping—release of oil reserves Podkul.S.com/id/43510170/ns/business-going_green/. said Gheit.61 a barrel on the New York Mercantile Exchange. http://latimesblogs." News of the oil release sent gasoline tumbling 14 cents a gallon in the futures markets. “Higher Gas Prices Drive Oil Decision”. oil analyst for Oppenheimer. the U.S. 2011 [accessed July 3." Cordier said.html. The Paris-based IEA.htm.6%. benchmark. adding that this could reduce retail gasoline prices to about $3 a gallon nationally and to about $3. In other energy news. "There are real worries over whether the deal to bail out Greece will hold together. http://latimesblogs. Wall Street analysts said.903 a week ago.56. The U. which monitors prices collected by the Oil Price Information Service and Wright Express at more than 100. down from $3. "The low $80s for oil are a definite possibility and that could knock another 40 cents to 50 cents off the price of a gallon of gasoline. the average price of a gallon of gasoline in California is $3." said James Cordier. benchmark has fallen 15% in the second quarter. was off 17 cents to $104.Greece CNN. its lowest close since Feb. was down an additional 56 cents to $90. as fears over Greece's debt issues pushed both stock and commodity prices broadly lower. having dropped as low as $102. the average price for a gallon of regular in the U. http://money.837 a gallon." Currently.S. MD] NEW YORK (CNNMoney) -. will release 30 million barrels of crude.com/2011/06/15/markets/oil_prices/index.565 a gallon.OIL DA Varsity Prices low – trending down Oil prices lower.S.61 a barrel after falling as low as $89.S.sliding down LA Times. president of Liberty Trading Group. The U. 2011 [accessed July 3. Japan and South Korea are releasing 7. where Wednesday's sell-off sent the Dow down more than 200 points. "The commodity bubble burst 30 days ago. Oil hits lowest level since February. the U.latimes. which includes the U.755. economy is slowing down. down from $3. the European benchmark.S." said John Kilduff. to $94. particularly that of Greece.81 a barrel.cnn. or 4. the IEA added.2 million barrels of crude and 15 million barrels of products Oil prices lower. were seen as the biggest factors. Continuing concerns about the strength of the global recovery and angst over European debt levels. 18. make up for the loss of Libyan oil on world markets and provide a boost to struggling economies. Nationally.S.40 to $3. prices should continue to trend lower.4 million barrels of crude and 3. the average fell to $3..98 a gallon in early May. 2011. and European nations will release 4. Oil's slide was continuing Monday on a volatile trading day.50 a gallon in California. Cordier said that as long there continue to be signs that the U. was $2. And last week's announcement about the release of oil from strategic national reserves is definitely having an impact.135 a gallon. Oil prices closed down $4.96 million barrels of refined oil products.S. A year ago." 42 . MD] Crude oil prices are on such a slide that they could drop back into the low $80s a barrel. Brent crude. "We're are looking at $80 to $85 a barrel oil after driving season ends [after Labor Day] if these trends continue. Crude prices took their cue from the stock market. The retail gasoline figures are from the AAA Fuel Gauge Report.. announced last week that government reserves would be tapped in a bid to reduce crude prices. 5 reasons to be bearish on oil stocks Oil has been in somewhat steady decline for weeks now after hitting more than $110 a barrel earlier this year. the IEA said.95 a barrel.28 a barrel on the ICE Futures Exchange in London. the 28-member International Energy Agency announced a nation-by-nation breakdown of how much oil and refined products were going to be released from strategic reserves. "The speculators are running for the door.25 a gallon in May. and large oil consuming nations such as India and China are taking measures to stem inflation.com/money_co/2011/06/retailgasoline-prices-may-decline-sharply-soon.Oil prices plunged more than 4% Wednesday to their lowest level in nearly four months.61 a barrel on the New York Mercantile Exchange. but still significantly higher than the year-ago average of $3. June 27.000 service stations across the nation. West Texas Intermediate crude. 2011. That's also down from a high of $4. a partner and energy analyst for Again Capital in New York. June 15. OIL DA Varsity ***High oil bad – US economy*** 43 . Under those circumstances. Previously. 44 . 3/1/04 Similarly. if energy costs stopped pushing prices upward.or at least not less -. economy would inflict enormous. keep the Federal Reserve on the sidelines.25 was enough to reverse a two-day sell-off and push the Dow Jones Industrial Average ($INDU) up 31 points. and Ben Bernanke and company at the Fed would be more likely to keep their fingers off the rate-increase trigger. but $64 a barrel oil in June 2007 would be enough to give the economy a big boost over the course of a year. 9/12/2006 The last month has given investors a lot of evidence of how a modest pullback in oil prices can fuel a stock market rally. inflation and transportation industry Jim Jubak.OIL DA Varsity US Economy – low oil best Low oil prices would jumpstart the US economy – stocks. msgs). in the last 60 years. he served as senior financial editor at Worth magazine and as editor of Venture magazine. a large national debt can turn from a source of strength to a crippling liability. unacceptable damage on the rest of the world. senior markets editor for MSN Money. and push up stock prices in 2007.thanks to lower or steady prices at the pump.-led system. countries including China and Japan would fall into depressions.07 drop in the price of a barrel of oil (for October delivery) to $66. For example. Kissinger Senior Fellow at the Council of Foreign Relations.S. Foreign Policy. economy and the ruin of the dollar would do more than dent the prosperity of the United States. And the decline in oil from $77 on Aug. as foreigners have acquired a greater value in the United States--government and private bonds. 8. But. The S&P 500 ($INX) climbed 1% during that period. on Sept. debt becomes a strength. a collapsing U.S. the $1. The US is key to global economy Walter Russell Mead. Consumers would have more to spend -. too. A collapse of the U. news. like Samson in the temple of the Philistines. not a weakness. The financial strength of every country would be severely shaken should the United States collapse. Lower oil prices would have domino effect Gross Domestic Product (GDP) numbers don't react that quickly to short-term changes in energy prices. and other countries fear to break with the United States because they need its market and own its securities. Sweet scenario. pressed too far. Without their best customer. The Federal Reserve would breathe a sigh of relief. Of course. and the United States must continue to justify other countries' faith by maintaining its long-term record of meeting its financial obligations. no? Lower oil prices keep economic growth higher than expected. direct and portfolio private investments--more and more of them have acquired an interest in maintaining the strength of the U. consumer spending. 8 to recent levels was enough to propel the S&P 500 Stock Index ($INX) to a 3% gain for the month and to sustain the market's rally into the historically weak last two weeks of August. That is sticky power with a vengeance.S. Lower fuel prices would take the pressure off profits at companies from airlines to truckers to railroads to retailers such as Wal-Mart Stores (WMT. restaurants. Charleston Daily Mail A surge in oil prices would hurt everyone: consumers. On their part. Unlike the high prices that resulted from the 1973 oil embargo and the Iranian revolution of 1979. rapidly. policies on terrorism and democracy). go out of business. economy and for U.S. energy security Oil and natural gas price increases in recent years have had a profound impact on U.S. alter the way businesses are run. senior editor at Foreign Affairs. This would raise the price of finished goods. delivery businesses. by increasing the cost of their energy and other raw materials. The sectors most at risk include: * The aviation industry. both commercial airlines and cargo airlines. economy The Southern States Energy Board. in the extreme. by making transportation and heating far more expensive. and numerous other energy-dependent businesses A surge in oil prices would cause an inflationary spiral. setting off a dangerous inflationary spiral. businesses. 5/1/2004. Worse. p. 5/24/2004 Government officials are also concerned about having to change inflation targets in line with the increase in oil prices. Either oil producers around the world simply cannot meet rapidly increasing global demand. hurting the US economy Jonathan Tepperman. including air transportation industry manufacturers and suppliers * The agriculture industry. July 2006.S. Americans are nearly unanimous in the belief that dependence on imported oil is a very serious problem. rising oil prices have disturbing implications for the U. decreasing sales and hitting consumers yet again. or OPEC members (and possibly others) are manipulating oil supplies and prices for maximum profit (and perhaps to retaliate economically against U.S. there have been no recent major oil supply disruptions. AMERICAN ENERGY SECURITY: BUILDING A BRIDGE TO ENERGY INDEPENDENCE AND TO A SUSTAINABLE FUTURE. taxi and limousine services. Fully 92% The latest oil price surge is unique.OIL DA Varsity High oil bad – US economy high oil prices threaten multiple sectors of the u. 45 . workers are seeking a wage hike in light of the spiraling effect of the increase in oil prices on the cost of commodities. 2-3. High oil prices cause inflation BusinessWorld (Philippines). including pesticide and fertilizer manufacturers • The automobile industry. and producers. or. a sudden jump in oil prices could also cause interest rates to skyrocket. change capital investment.s. laundry and dry-cleaning firms. Increased energy prices have required companies to pass along price increases to consumers. including the supporting parts manufacturers and the sales infrastructure • Trucking companies. In either case. landscapers. as we saw in the 1970s. florists. OIL DA Varsity ***A2 high oil good*** 46 . For this to be correct higher prices would have to lead to higher demand for oil without other factors changing. his own data proves him wrong Don Egginton. McKillop labels this a "reverse elasticity. with oil prices in today's prices at $ 38-55/bbl. June 14. McKillop makes little attempt to do this." No economist. For example. Oil and Gas Journal McKillop also asserts that there have been four oil price shocks since 1973 but that none of these "had an immediate. Moreover. Observations lead McKillop to conclude that sharply rising oil and gas prices increase economic growth rates. If McKillop could show oil is a "Giffen good. it is clear from McKillop's Table 1 (replicated in part in Table 1 here) that the very high real price of oil in 1979 subsequently led to significantly reduced demographic demand. He attributes this to high oil prices causing high growth. but these are not dealt with. Causation flows from strong demand to high oil prices.OIL DA Varsity A2 high oil good for economy McKillop’s claims that high oil prices boost the global economy are wrong Don Egginton. the depressing effects of high oil prices -. What McKillop would have to do is distinguish between high prices caused by strong demand and high prices caused by supply constraints. June 14. at least up to $ 75-100/bbl. Mckillop’s claims that high oil prices increases demand are inapplicable to the real world Don Egginton. 2004. Although McKillop points out that the OECD achieved growth during 1975-79 of 3. Yet correlation does not indicate causation. and therefore. policy advisor. and his "reverse elasticity" is a simple distributional effect because of the alleged differences in the propensities to consume. 2004. There are a number of other.9% year-on-year. Economists know this as the Giffen paradox but have yet to provide conclusive evidence that the theoretical possibility exists in practice.75%/year. Once this is acknowledged. McKillop's view starts from the observation that high oil prices and rapid gross domestic product growth can coincide.5%/year.are masked by growth. Oil and Gas Journal McKillop also claims that higher oil prices. Unfortunately. McKillop’s claims that the last 4 oil shocks were not detrimental to oil demand are misleading.75%/year. not McKillop's. during 1975-79. McKillop's argument rests upon a transfer of resources rather than a price effect. In this situation." which is wrong. will result in a fall in world oil demand and are "doomed to failure" because high oil prices lead to higher demand for oil. In fact. Lags in reaction to changes in the economic environment are an important part of all economies. with an average growth rate of just 0. 47 . It is more plausible to believe that oil prices are high because a fast-growing world economy (or expectations thereof) raises the world demand for oil. large impact on demographic demand [oil demand per capita]. most countries in the Organization for Economic Cooperation and Development achieved growth rates of about 3. and inflation is exacerbated by it. or even politician expects the economy to react immediately to changes in the economic environment." this would be a revelation. The slow growth after the 1973-74 oil price shock is consistent with the standard view." This assertion hinges on the word "immediate. June 14. 1974 and 1975 recorded the lowest consecutive annual growth rates since figures began in 1961. 2004. Oil and Gas Journal McKillop makes a number of assertions and observations that are repeated below.falling GDP and rising inflation and unemployment -. extraneous comments in McKillop's article. inferring that high prices can boost world activity is wrong. his data for 1985 also show that high oil prices below his $ 75-100/bbl estimate also reduced demand. it should be noted that this is well below the growth rates achieved in 1961-73 of 5. typically.5 percent decline in economic growth.2004. economies usually regained only about a tenth of what they had lost in the preceding spike. “as well as uncountable costs in personal dislocations. volatility would pose an enormous risk to the fast-growing global economy. Research showed that after each of the six major oil price spikes since the Second World War. 108 Yet for many in the West. price spikes had cost the economy 15 percent in growth. according to energy economist Philip Verleger. and more than a $1. the effects of price hikes were “asymmetrical. every five-dollar increase in oil prices brought a . the Gulf War had simply reemphasized the fundamental flaws in the oil order. Worse.2 trillion in direct losses. energy expert and writer for Harpers. Even if OPEC had declared an era of price stability. Cumulatively.” 48 .” When prices came back down. pg. particularly in the United States. continued to argue that as long as oil remained under the political control of states like Saudi Arabia and Venezuela.OIL DA Varsity A2 shocks bounce back Price spikes limit economic recovery Paul Roberts. The End of Oil. global economic activity had begun to fall within six months. Western observers. With the exception of differences in price because of crude type and transportation costs. Arleigh A. imports will change accordingly.csis. Burke Chair in Strategy at CSIS. or prices change drastically. the United States will pay the same globally determined price as any other nation.org/burke/mees/meeafteriraq. the United States is required to share all imports with other Organization for Economic Co-operation and Development (OECD) countries in a crisis under the monitoring of the IEA. http://www.S. If a crisis occurs. The percentage of oil that flows from the Middle East to the United States at any given time has little strategic or economic importance.pdf Oil is a global commodity distributed in a global market. January 30 2004.OIL DA Varsity A2 Stockpile solves The US can’t stockpile oil—the OECD prevents it Anthony Cordesman. the source of U. In a crisis. and the direction and flow of exports changes according to demand. Moreover. all buyers compete equally for the supply of available exports. 49 . OIL DA Varsity ***Oil is FINITE*** 50 . 3. energy official. 2011. Again. None of this bespeaks a growing industry.energyandcapital. According to industry and government officials. http://www.S. “2015: End of the Oil Age – Consensus Grows for Looming Peak”. all of the majors have been shedding exploration staff and consolidating their holdings. including “civil unrest”.oil optimisits are fueled by political benefits not by actual science Paul Roberts (Energy Author) 2004 The End of Oil p. b. the economic downturn.ca/articles/PFE307A. The report also noted it was impossible to forecast the exact moment when supply would peak — but there would be global consequences. CJJ As recently as 2009.) Technology is not a fix a. This seems to belie actual experience. “and the Energy Information Agency has put out such overblown numbers. that it should be statutorily barred from answering questions about oil. and even they would be hard pressed to do so. after being repeatedly threatened under the Freedom of Information Act. 2. should Peak Oil occur in the short term. energy policy on what the USGS thinks about future oil supplies:’ says one former high-ranking U. Saudi Arabia is just about the only country with the capability to increase production by any noticeable amount.61-62 Thus. accessed on July 3. the industries would not be scaling back. the UK government has had this report for years and has been denying its conclusions the entire time. despite the widely understood fact that all oil estimates are highly speculative – statistical extrapolations based on data from known oil fields – such forecasting agencies as the USGS. And insiders know that there is very little excess capacity to be found anywhere. The report's conclusion stated it is “clear” that: Existing fields are maturing.) Companies have stopped investing in new extraction technology proving the end of oil is near Dale Pfeiffer (Renowned Geologist) 7/30/2003 http://globalresearch. In a worst-case scenario.) The past 30 years prove new technology leads to only marginal gains in supply Dale Pfeiffer (Renowned Geologist) 7/30/2003 http://globalresearch.” 51 . and done it with such arrogance. and financial crisis. July 1st. this Panglossian dynamic occurs in every forecasting bureaucracy and does little to encourage policymakers even to consider the issue of oil depletion.” The government consistently cited the International Energy Agency's forecast that Peak Oil wouldn't occur until 2030. We now know the Labour Government spent six months evaluating the likely impacts of Peak Oil back in 2007.OIL DA Varsity Finite oil UK study shows peak oil will occur in 2015 Nick Hodge. when it did.html However.html Still there are economists who will tell you that it is only a matter of money.S. for example. the government was warned of “significant negative economic consequences”. editor at Energy and Capital. and Europe’s International Energy Agency are under intense political pressure to err on the side of wild optimism. a USGS report giving a low figure for oil reserves in the Arctic National Wildlife Refuge was withdrawn under pressure from pro-oil lawmakers in Alaska and rewritten with a more optimistic conclusion. If it were otherwise. Now. Instead of investing in production and discovery. )Energy experts agree.com/articles/2015-end-of-the-oil-age/1609.) As a result of that research. Over the last thirty years increased investment and technological advances have led to only marginal gains in discovery and production. During the 199os. the EIA. also that existing policies put it “in a good position to deal with the longer-term challenge of declining oil reserves. The rate of investment in new and existing production is being slowed down by bottlenecks. the major oil companies have started making coded announcements indicating that they know the future of the oil business will not match its past. If we throw enough money into exploration and development we will increase production. and Alternative technologies to oil will take a long time to develop and deploy at scale. the release of a years-old report shows the UK government has known about imminent Peak Oil and its consequences. And err they do.ca/articles/PFE307A. the peak would happen before 2015. 2011. the United Kingdom's official position was that “global oil (and gas) reserves are sufficient to sustain economic growth for the foreseeable future”. “It would be a huge mistake to base U. if at all. (You can see that research in a PowerPoint recently released by the government. it becomes clear that new oil is indeed getting harder to find.7 mb/d and by 2003 it had fallen to 22. whereas last year it declined by nearly five percent. "It appears that depletion is now becoming a much more significant." said Chris Skrebowski.6 billion barrels of new oil annually.new fields are much smaller then old findings Paul Roberts (Energy Author) 2004 The End of Oil when one charts the average volume of oil that has been discovered each year since the beginning of the century.) Oil discovery has peaked. a little less oil each year — with the exception of a small blip in the late 1990s. the oil and gas magazine of the Energy Institute in London. The analysis shows that output from 18 significant oil-producing countries.according to a new analysis published this month in Petroleum Review. on average. and may be contributing to the rise in oil prices. who prepared the new analysis.org/nws/2004/08/23/over_a_million_b The world is now losing more than a million barrels of oil a day to depletion . Based on data in the latest BP Statistical Review of World Energy.twice the rate of two years ago . when it peaks. contrary to the widely held view that depletion progresses slowly. 52 . In fact. "With world oil demand surging faster than anyone expected. industry is finding less than 40 percent of the new oil it needs to keep the base of known reserves from shrinking. though largely unrecognised. oil companies have found. the number of barrels found each year and red in the books as known or discovered reserves — climbs steadily upward from 1860 until around 1961. off the shore of West Africa. since 1995. Year by year.) Oil depeletion is increasing rapidly Oil Depletion Analysis Centre 8/23/2004 http://www. 6. just 9. In fact. on average. The annual rate of decline also appears to be accelerating.OIL DA Varsity Finite oil 5. it is no wonder that current supplies are stretched to the limit. According to a study by Wood Mackenzie Consultants. and in the Gulf of Mexico. as big finds were announced in the Caspian. the volume of newly discovered oil — that is. Since then. In 1998 their total production dropped by less than one percent." he said. declined by 1.ems. Editor of Petroleum Review and a Board member of The Oil Depletion Analysis Centre (ODAC). consideration in the supply-demand equation. accounting for almost 29 percent of total world production. the world has used 24 billion barrels of oil a year but has found. production from this group of 18 countries peaked in 1997 at 24.14 million barrels a day (mb/d) in 2003.1 mb/d.